MBIT Thesis

Mobile Virtual Network Operator (MVNO)

Professor: Author:
Date

Dr. Gregory Yovanof T. Bassayiannis
08/12/2008

Table of Contents
1. 2. Mobile Virtual Network Operator (MVNO) - Abstract ..........................................................................5 The MVNO ..........................................................................................................................................6 2.1 The Beginning of MVNOs ...........................................................................................................8 2.2 The Value-chain & Value Net ...................................................................................................12 2.3 The players ...............................................................................................................................15 2.4 Mobile Solutions .......................................................................................................................16 2.5 Characteristics of an MVNO .....................................................................................................16 2.6 A typical MVNO Business Model ..............................................................................................17 2.7 MVNO Defined From a Customer Perspective.........................................................................17 2.8 MVNE (MVNO Enabler)............................................................................................................19 2.9 MVNO & MVNE ........................................................................................................................20 2.10 Why MVNOs make sense.........................................................................................................20 2.11 Key driving factors enabling the MVNO opportunity .................................................................22 2.12 The MVNO opportunity .............................................................................................................22 2.13 MVNO opportunities increase with 3G rollout...........................................................................22 2.14 The overall MVNO business context ........................................................................................23 2.15 MVNOs Backgrounds (Legacy and Next generation MVNO Models) ......................................24 2.16 Where is the MVNO today ........................................................................................................26 2.17 Next generation MVNOs...........................................................................................................26 3. MVNOs: Identities and Distribution ...................................................................................................28 3.1 MVNOS Global Initiative ...........................................................................................................28 3.2 MVNO Global market share......................................................................................................31 3.3 The Future of MVNOs in the 3G Era ........................................................................................32 3.4 Global MVNO Distribution.........................................................................................................32 3.5 MVNO Global Market Forecast (2006-2012) ............................................................................33 3.5.1 The Customer Segments......................................................................................................33 3.5.2 The Revenue Model (an example) .......................................................................................34 3.5.3 MVNO business Models .......................................................................................................34 3.6 MVNO Adoption in Europe - 151 MVNOs.......................................................................................40 3.6.1 Fixed telephony MVNOs in Europe ......................................................................................40 3.6.2 MVNO/MNO European Market share ...................................................................................41 3.6.3 MVNOs in Europe: numerous initiatives, very few successes ..............................................41 3.7 MVNO Adoption in Greece .............................................................................................................42 3.7.1 The MVNOs in Greece .........................................................................................................42 3.7.2 Mobile Network Operators customer base (June 2008) .......................................................43 3.7.3 MVNO Figures ......................................................................................................................44 3.7.4 MNOs ARPU and AMOU......................................................................................................44 4. MVNO/ MNO/ MVNE Benefits and Drawbacks .................................................................................45 4.1 Advantages/ Benefits................................................................................................................45 4.2 Disadvantages/ Drawbacks ......................................................................................................46 4.2.1 MVNE trends ........................................................................................................................48 4.2.2 MVNE Uses in Europe..........................................................................................................48 4.2.3 MVNO-MVNE-MNO Functional Model .................................................................................49 4.2.4 Viability of Virtual Mobile Players..........................................................................................50 4.2.5 Sustainability.........................................................................................................................51 4.2.6 Brand identity in Mobile Services..........................................................................................51 4.2.7 Type of Companies attracted to the MVNO Model ...............................................................52 4.2.8 VALUE TO MNO...................................................................................................................53 4.2.9 VALUE TO MNO & MVNO ...................................................................................................53

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4.2.10 VALUE TO MVNO ............................................................................................................53 4.2.11 Different approaches to mobile services...........................................................................54 4.2.12 Execution & Fulfilment ......................................................................................................56 4.2.13 Business Planning ............................................................................................................56 4.2.14 Business Design ...............................................................................................................57 4.2.15 Business Infrastructure .....................................................................................................57 4.2.16 Production Support ...........................................................................................................58 4.2.17 Conclusion ........................................................................................................................59 4.2.18 MNO Motivations (to host MVNOs)...................................................................................60 4.2.19 Host MNO Benefits ...........................................................................................................60 4.2.20 Host MNO Requirements..................................................................................................61 4.2.21 Host MNO Wholesale Business Potential (Example) .......................................................61 4.2.22 The MNO Perspective ......................................................................................................61 4.2.23 The MVNO Perspective ....................................................................................................62 4.2.24 MVNOs rationales.............................................................................................................64 4.2.25 MVNOs positioning ...........................................................................................................64 4.2.26 Key challenges faced by MVNOs .....................................................................................68 5. The MARKET structure & opportunities ............................................................................................70 5.3 MVNO market drivers ...............................................................................................................70 5.4 MVNO market structure ............................................................................................................70 5.5 Market size ...............................................................................................................................71 5.6 MVNE value..............................................................................................................................71 5.7 Aggregation business model benefits.......................................................................................71 5.8 Key Requirements ....................................................................................................................72 5.9 Competition is intensifying –mobile premiums decrease..........................................................72 5.10 Local scale is key to achieving EBITDA margin ambitions .......................................................74 5.11 Operators need to adjust ..........................................................................................................74 5.12 The challenger strategy must be tailored to the market environment.......................................75 5.13 Marketing strategies .................................................................................................................75 5.14 Timing .......................................................................................................................................76 5.15 Provider Selection criteria.........................................................................................................77 5.16 MVNO Services ........................................................................................................................77 6. MVNO BUSINESS SETUP ...............................................................................................................80 6.1 Setting-up Strategies ................................................................................................................80 6.2 Key Issues MVNO players are faced with ................................................................................80 6.3 Issues per player ......................................................................................................................81 6.4 Targets per player.....................................................................................................................82 6.5 Business Case Structure ..........................................................................................................82 6.6 MVNO Business Guide.............................................................................................................83 6.7 The MVNO Business: High Entry Barriers and Risks ...............................................................83 6.7.1 Barriers .................................................................................................................................83 6.7.2 Launch Risks ........................................................................................................................84 6.8 The future of MVNOs................................................................................................................85 6.9 Implementing an MVNO ...........................................................................................................86 6.10 Modeling MVNOs: The Big Picture ...........................................................................................90 6.11 Critical Success Factors ...........................................................................................................94 6.12 Closing remarks........................................................................................................................96 7. Conclusions.......................................................................................................................................97 7.1 Conclusions & Lessons to be learned ......................................................................................97 7.2 Conclusions regarding the future....................................................................................................98 7.3 Three improvement suggestions ....................................................................................................99 8. References......................................................................................................................................100

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9. Annex 1 - Case Study – Western Europe Cellular revenues ..........................................................101 10. Annex 2 - MVNO Experience ......................................................................................................107 Annex 3 - Glossary................................................................................................................................109

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1. Mobile Virtual Network Operator (MVNO) - Abstract
This thesis addresses the phenomena of Mobile Virtual Network Operators (MVNO): often MVNO do not come from the telecom sector but they rent the network of mobile operators to become fully mobile operators on their own. So they compete directly not only with the other mobile operators but also with their hosting mobile operator. Hosting MVNOs, supporting them from both operational and commercial perspectives are new challenges for the mobile operators: they have to set up a specific internal organization because they used to be a vertically integrated industrial structure. All of this represents tremendous changes for them. The aim of the thesis is to research and analyze the current status of the MVNO industry, present different views on implementation approaches, identify markets and market segments served, note weaknesses and strong points, refer to successes and failures, research current legislation(s)/ regulatory aspects (that are an essential driver for the liberalization of network economies) and in general show the industry’s evolution path over time. The key element is to see if the MVNO is able to increase the efficiency and competitiveness of mobile markets in specific. Additionally, starting from the Western European market, an effort will be made to specifically analyze the case in the Greek MVNO market by providing some specific data such as type of service (prepaid/postpaid), airtime replenishment volumes (prepaid case), brand awareness, market segments, penetration/ adoption rates, etc). Having gone through the MVNO insights at the end, a description of all the steps involved for an entity/ business, in becoming an MVNO from scratch (in the form of a generic guide) will be prepared. A stepby-step approach will be used for implementing a Mobile Virtual Network Operator (MVNO), stating actions to be adopted and mistakes to be avoided. Given that most of the current implementations have followed different/ diversified paths (depending on the market needs to be served each time as well as the intended capital investment by the MVNO candidates), an effort will be made to come up with guidelines (hopefully the most suitable ones, having learned from former/recent MVNO adoptions) for aiding such future implementations. Another important aspect is the modeling of a mobile network: the MVNOs will use some components while other components are un-useful for them. Without such model, it is impossible to derive the right costs and price to be charged to the MVNO in order to have a win-win industrial model for both the MVNO and its hosting operator.

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2. The MVNO
There is a lot of definitions for MVNOs in the sector but a sound definition of virtual operators would consist in saying they are actors not totally integrated who lack at least a part of the asset at the basis of the network.. Applied to mobiles, this means they do not own the radio access. However they supply to the market a complete mobile service and they own partially or totally their customers. They rent at least the radio access to their hosting operator but nothing prevents them to rent more than that to the operator as some elements of the service provided to the end user (billing, contact center, …). They also complete the radio access by their own assets like a transport network or some switching infrastructure. However MVNO today are most of the time simple resellers of mobile services that the hosting operator operates technically. Scarcity of spectrum has allowed only 3 to 5 mobile operators with a full infrastructure per country via a licensing process. However it appeared quickly this number was insufficient to have a fully efficient (and competitive) market despite the existence of 3 to 5 competing networks. National Regulatory Authorities (NRA) has seen MVNO as a (too) quick remedy at least for the access mobile market. This new kind of actors was deemed to bring more competition (which is not an objective in itself) that would boost innovation and economic welfare. Today NRAs consider other remedies like spectrum trading as a means to enable more innovation in wireless sector. However MVNO remain an efficient means to break the vertical integration of MNO that is considered by some authors as one of the root cause for a player not to innovate any more; the MVNO comes indeed between the MNO and the end user. Other authors consider on the contrary that vertical integration allows economies of scale and scope that amortizes more easily investment. It is an incentive to take more commercial and financial risks. MVNOs too use 3rd parties for their own innovation so that this argument may not sound completely true. The multiplication of wireless technologies, the emergence of UMA and IMS will demand new players active on multiple networks without having the opportunity to own all of them. They will become de facto virtual operators on other’s assets to operate their services seamlessly across networks and technologies. Such virtual operators will be innovation-driven. Another more accepted obstacle to innovation in network economies are the guaranteed incomes that mobile operators can expect due to their oligopoly situation. The mobile sector is indeed a kind of oligopoly with guaranteed income. MVNO can break this situation as the guaranteed income is based on the difference between the costs of the network (assets), the revenues and the limited number of players. An MVNO does not own a network and is not stuck to this logic.

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They are dependent on MNOs for network facilities. Full MVNO Owns everything (including HLR) except the radio network equipments. as well access to radio network. and will to some extent be analogous to local loop unbundling (LLU). Enhanced resellers may require NSP individual licence if they provide bandwidth services. billing and customer care. MVNOs that operate as resellers are likely to require an ASP licence. A key feature that distinguishes a full MVNO from other business models is its ability to operate independently of the MNOs. cellular mobile services or mobile application services and an ASP licence to provide public cellular services to end users. offer its own SIM card and have full flexibility on the design of the services and tariff structures. resellers are completely dependent on MNOs for every aspect of service provision. In most cases. MVNO Page 7 of 110 . Enhanced service providers may require NSP individual licence if they own or provide bandwidth services. enhanced service providers are those who do not own or provide network facilities but have the ability to secure its own numbering range. This type of access could be regarded as unbundling of the radio subsystem in the mobile telecommunications network. full MVNOs are likely to require a network facilities provider (“NFP”) individual licence and a network service provider (“NSP”) individual licence for the network facilities and network services that they own or provide. While they may still be able to offer their own branded packages. Additionally. Enhanced resellers are likely to carry out customer care and billing in house. As with enhanced service providers. end users will not be able to make a distinction between resellers. In addition.There are different kinds of MVNOs Classic Service Provider (reseller of the GSM operator offers) Resellers merely resell subscription to end users. MVNOs are considered as independent service providers willing to access the mobile operator’s radio network in order to develop and sell product and services competing directly with the mobile operators. enhanced resellers rely on MNOs for access to the radio network and network facilities. The key feature that distinguishes enhanced resellers from enhanced service providers is that enhanced resellers do not have their own SIM cards. A full MVNO is one that owns or provides network facilities and network services such as towers. they will not be able to distinguish their services by their MNC. These service providers are still able to maintain some independence from MNOs as they are able to differentiate their products. operate its own HLR and offer its own SIM cards with its own mobile network code. Enhanced resellers are primarily distributors who resell services provided by MNOs. So. So. Full MVNOs are able to secure their own numbering ranges. other form of MVNOs and MNOs as resellers have direct relationship with end users. mobile switching centres. home location registers (“HLR”) and cellular mobile services. full MVNOs will require an application service provider (“ASP”) licence in order to provide public cellular services to end users. However. ESP: Enhanced Service Provider (Hybrid MVNO) Procures their own SIM cards and controls a few network elements. cellular mobile services or mobile application services and an ASP licence for providing public cellular services.

Customers bought SIM cards only (solely on-line).2. however pioneering. Perhaps more importantly. the market can accommodate a few extra niche players. using phones they already owned.1 The Beginning of MVNOs It all started in 2000 in Denmark with what was then a small start-up called Telmore. MVNOs though will only really have an impact if the incumbents lose their nerve on price and try to follow them down. They prepaid a single per-minute rate regardless of what time of day they made a call or whether they called a mobile or fixed line. Telmore launched an MVNO business solely online. Provides services over the mobile platform Combines the reseller and the service provider business models Owns portion of the mobile network with or without SIM cards depending on choice of mobile technology of the MNO Has more control of the mobile network and enables mult operator agreements Service Provider: Enhanced Service Provider: MVNO: Complete MVNO: MVNO Page 8 of 110 . within a 10-month span. Telmore had attracted 10 percent of the mobile market. "In the beginning. it went slowly. Pictorially the different kinds of MVNOs can be seen below: Radio access Host MNO Host MNO Host MNO Switches & other network elements Services & content CRM & Billing Marketing & branding Distribution Reseller Enhanced Service Provider Full MVNO NOTE: GSM operators are referred to as « MNO – Mobile Network Operators » Therefore in short each of the business models practically means that: Reseller: Enhanced Reseller: Buys bulk airtime from the MNO and resells to target segments Offer their own branded packages but they will not be able to distinguish their services by their MNC. Enhanced resellers are likely to carry out customer care and billing in house. the price of a prepaid minute in Denmark had dropped by 50 percent. but gradually it increased mainly by word of mouth. Within three years. If they can hold their nerve and not panic and accept some leakage. this first online SIM-based concept was a niche concept and targeted only a small share of the market. Along those lines. This first MVNO model however has paved the way for others to follow. Using the mobile network of the former state operator TDC.

overseas-call routing. email services separately from those the host MNO can support. some other way of looking at the business models involved can be seen below. ‘Thin’ MVNOs will normally source their own billing and customer care services. customer care mechanisms. ‘Thick’ MVNOs. advanced messaging (MMS or SMS) services. voicemail.Depending on the extent of involvement/ adoption in the value chain. and provide their customers with basic voice/text services. They will establish their own tariffs. or offer advanced Internet. routing for overseas calls. in addition to their own billing and customer care. usually with simple Internet access and some premium content services. and WAP gateways. The figure below shows a typical MVNO infrastructure showing (in green) what a ‘thin’ one might provide and the additional features (in blue) that a ‘thick’ MVNO could offer MVNO Page 9 of 110 . will frequently run some of their own network services. They won’t be able to provide custom facilities like voicemail. This allows these virtual operators to provide advanced services such as VoIP. more sophisticated email products or custom-built handsets. typically SMS or MMS.

MVNO Page 10 of 110 .Infrastructure Matrix Offered primarily to nontelecom companies or telecom companies wanting to diversify without significant investments Offered to companies with some experience in telecommunications who can take over some of the responsibility for providing key services Network Rollout The mobile network roll-out follows three MVNO Lifecycle clear stages.

(through all the technology and support needed) to service the target market and start generating revenue. offer packaging.Strategy Development. Traditional billing systems do not meet the requirements of an MVNO MVNO need Low TCO Motivation Insufficiencies today • Fewer subscribers to carry total cost of billing • • Solutions do not scale down costefficiently Incomplete solutions Easy introduction of new services • • • Limited billing competence Excellence in time to market critical The core business and growth opportunity Focus on core business with lean organization • • Products build to be run by large billing departments Cross-product dependencies Future-proof growth into mobile and VAS Opportunity for outsourcing • • Legacy products lacks in architectural flexibility MVNO Page 11 of 110 .

Potential Entrants. An effective competitive strategy according to this approach takes offensive or defensive action in order to create a defendable position against the five competitive forces. spectrum. The state of competition in an industry depends on five basic competitive forces. The attractiveness of an industry. such as the telecommunication industry. Emotional. Competition in an industry is rooted in the underlying economic structure of the industry. Substitutes and Rivalry among existing firms – depends on some major factors and characteristics listed in the work of Porter.2.2 The Value-chain & Value Net The Value Chain By looking at the value chain and considering the involved enablers (Technical. profit) it can be said that MVNOs fall between emotional and spectrum enables (between service and network operators. or between ASPs. Buyers. ISPs and Portals from one side and Mobile Network Operators from the other) The standard approach to the analysis of industry attractiveness is Michael Porter’s Five Forces framework. which has become the standard approach to these analyses. The figure below gives a picture of the Porter’s “Five Forces” framework: The power of the five forces – Suppliers. In his book ”Competitive Advantage” [4] Michael Porter suggested analyzing the “cost leadership” and “differentiation” strategies by means of the value chain model. MVNO Page 12 of 110 . depends on the state of competition. physical.

Logically.Figure 1: Porter’s Five Forces The Value Net The Value Net can be seen as a generalization of the Five Forces framework. Complementors are added as a new dimension. A player is a competitor if customers value your product less when they have that player’s product than when they have your product alone. The Value Net emphasizes that the value to the customers can depend on a package of complementary services and/or products. Figure 2: The Value Net A player is a complementor if customers value your product more when they have that player’s product than when they have your product alone. Complementors will influence the attractiveness of an industry. MVNO Page 13 of 110 . Figure 2 gives a picture of the Value Net of a company.

To that extend.Also. The set of arrangements between the different actors will include how profit. that when brought together. The value network is important part of the organisation design presented by Faber [Faber 2005]. and service providers to offer personalized services to mobile users in a way that suits their individual needs at a specific place and time. Two primary types of value can be distinguished: 1. a value network can be seen as a web of relationships that generates economic value and other benefits through complex dynamic exchanges between two or more individuals. cost. The fact that consumers would like to have only one billing relation will most likely consolidate the number of actors. risk and revenue sharing are arranged. in an MVNO implementation an extended personalization concept is presented that enables value networks of content providers. network providers. a new value network with different types of interactions between stakeholders will be needed in the new MVNO market. Tangible value exchanges . realise their own strategies and goals. Therefore.involve all exchanges of goods. services or revenue 2. groups or organizations. will create value for the customers and at the same time.include two primary subcategories: Knowledge and Benefits. MVNO Page 14 of 110 . Intangible value exchanges . New networks will consist of many different actors that have certain resources and capabilities. investment.

Network effects help to drive the adoption and value of the service. to content. as well as operators. Examples of models belonging to the Service centric category are the WEB 2. offering a compelling value proposition.MVNO .A Service Centric Business Model In the Service Centric Business Model a Network Provider offers seamless access on a number of core and access networks.Model_2: (MySpace.Model_1 (Flickr. facilitating the business model. Skype): The model is based on technical innovation. A community is built around content like User Profiles for MySpace or interesting Blogs as is the case for Gawker. . the involved parties/ players include several types of providers ranging from service. MVNO Page 15 of 110 . The Service Provider bundles this seamless access with a number of aggregated services. This is the case exactly for all MVNO types. Sometimes the SPs syndicate their content to 3rd parties like Google or Yahoo. 2.3 The players Along the value chain. to network etc. Technology is important as an infrastructure tool. Value adding services are being offered as a premium for which the customer has to pay.0 services: . YouTube): The business model is based on network effects created by a user base and user interaction.

or wireless infrastructure but give a virtual appearance of owning a wireless network. • MVNOs generally provide both voice and data services to end users through a paid up subscription agreement. • Main added value that MVNO provides is billing and customer care functions. MVNO Page 16 of 110 . In that sense MVNOs own the customers.Content Provider Mobile Application Providers Mobile Marketing System Integrators Internet Service Providers Content Value Addition Delivery Enterprises / Mobile Subscriber Internet-to-mobile service providers Modem-based service providers Short-Code Operators MVNOs (for Data Services) MNOs 2.5 Characteristics of an MVNO • MVNOs are new breed of wireless network operators who may not own the wireless spectrum. These operators lease the wireless capacity from traditional operators and then repackage it for a specific vertical industry application.4 Mobile Solutions An overview of the ICT component when implementing different MVNO types is as follows: 2.

rather than just a brand. That doesn't mean upstarts wanting to become MVNOs can't succeed. one should cobble together a partnership that consists of a connectivity of a regular Telco. and a sales channel. That is in Greece for example Frog is seen to its customer as their network provider. just as Cosmote is seen as a network provider. Marketing. so there can be seen a variety of business models. Different functions can be carried out by the MVNO or MNO. Portal. MVNEs develop systems and processes to help facilitate MVNOs. as evidenced by Virgin or Boost—neither of which were pre-existing brands in the mobile space at their inception. But a classic MVNO minimizes capEx and keeps expenses as successbased as possible. Customer base 2. such as handset distribution. Success for those companies depended on delivering high-quality service. there is a range of MVNO classifications/ types between Service Providers (SP) and full MNOs. MVNO Page 17 of 110 . MVNOs typically have a strategic intent focused on a recognized brand. and moreover Next Generation MVNOs. It buys access from a host carrier—often perminute or per-megabyte—and resells it under its own brand and marketing. billing platform. • An MVNO usually provides: Brand. Considering the typical retail and network elements involved in an MVNO. Rights management.7 MVNO Defined From a Customer Perspective To Fully understand the MVNO. as an MVNO is a customer driven. we have to look outside the legacy network led definitions of an MVNO. with existing points of distribution and an already installed base of customers. channel management or billing. Some may be carried out by a Mobile Virtual Network Operator Enabler (MVNE) which may simplify the MVNO provisioning for either the MVNO or the MNO. not the host MNO (Cosmote). 2. The term ‘MVNO' has become a catch-all for any consumer reseller. customer care and content delivery. a customer base. an MVNO is a standalone entity. and therefore business driven business model. Most important. they need unique and compelling data services.• To become an MVNO. That means leveraging outsourcing solutions for billing.6 A typical MVNO Business Model At its most basic level. From a customer perspective both the MNO and the MVNO are their "Network Provider".

other point of sale. handset. the handset itself. or starter pack USE for calling. MVNO Page 18 of 110 . SMS. or other services PAY recharge or other payment method CARE get advice with questions or problems There are different ways of handling each stage: from the internet through to stores. care centres.Source: Christian Borman -2006 Customer experience The customer’s perspective is a simple four-stage process: Buy -> Use -> Pay -> Care BUY a SIM card. invoices.

However. MVNE is a service company delivering tools & services to companies wishing to market their services over a mobile network. an MVNE provides infrastructure (will interface with carriers to deflect the risk and costs) and services to enable MVNOs to offer services and have a relationship with end-user customers. Marketing functions are handled by the MVNO candidate: brand. an MNO can also become an MVNE in order for it to directly support MVNO Resellers and Service Operators.2. MMSC. customer base. order management. Some MVNOs want to completely rely on the underlying wireless network infrastructure of the host mobile network operator whereas other MVNOs want to own and/or control their own network elements. For example. hence the creation of the MVNE. Invoice and Settlement. The Full MVNE is the intermediary between the host MNO and a Reseller or Service Operator. operation and evolution of the MVNO service is handled by the MVNE. but with partner companies creating the end-user services and interacting with the customer. but leave the mobile service provision to partner companies. Work Fulfilment. Profile Management. This type of MVNE parallels the Full MVNO by implementing the same technical architecture and host MNO wholesale agreements. The operating scope of MVNEs mirrors that of MVNOs. the MVNE does not directly provide services to mobile users. So a special case of the MVNO model is the MVNE. These outsourced services include: Data Services. MVNO Page 19 of 110 . Service Provisioning. a MVNE can provide HLR. SMSC. MVNE’s provide the middle-ground in the sense that they can provide options to MVNOs for what they bring in-house versus what they rely on the host carrier. and thus becoming MVNOs. Instead.8 MVNE (MVNO Enabler) Most MVNOs will lack the experience of dealing with handset manufacturers and establishing upstream and downstream systems for service creation. • Limited MVNEs operate elements of the service delivery infrastructure. administration and operations to OSS/BSS support. MVNEs collect usage data and handle rating and billing functions. An MVNE does not have a relationship with end-user customers. to enable mobile service provision. MVNEs form the backbone of an MVNO’s business of wireless Network Services providing help in broad areas of product development and marketing. Billing. customer care and data centres. fulfilment. as well as more advanced network elements such as GGSN. but cannot offer the service innovation that a Full MVNE can provide. billing. An MVNE provides the technical architecture and may enter into a wholesale agreement with a host MNO. In other words. In other words. and other systems. distribution channels. it acts as an enabler for any number of MVNOs. The set-up. Instead. OSS/BSS. An MVNE offers infrastructure and related services ranging from network element provisioning. in much the same way as a Service Operator. Those companies are referred to as “MVNO candidates”. Customer Relationship Management. building the capability and capacity to enable wholesale services from MNOs. Revenue and Service Continuity Assurance etc. MVNEs often provide the “middle-ground” between MVNOs that do not want to have any control over network elements and those that want complete control. Content Management. such that: • Full MVNEs operate a core mobile telecommunication infrastructure. and may go so far as to handle provisioning. The Limited MVNE is also the intermediary between the host MNO and a Reseller or Service Operator. content management and settlement. service assurance.

some reasons why MVNOs make sense may be: • Many of the growth markets in mobile are riskier segments like the youth market. Financial markets are tough on operators if ARPU drops. As a result their offerings need to be focused on specific audiences with a strong customer care component. Leveraging an MVNE brings the MNO the benefit of significant wholesale traffic volumes from multiple third-party service providers.10 Why MVNOs make sense The mobile virtual network operator (MVNO) market is a crossroads for telecom. This often makes it difficult for them to efficiently support third-party suppliers that address niche market segments with services that differ from the host MNO portfolio. Sometimes there's a little data flavour. some MVNOs focus on the low end. On the other side are the high-end players looking at postpaid services involving data and content. the credit challenged and those who dislike most operators' billing methods for minute overages. The idea that a mobile phone can lead to a customer's wallet and loyalty has a range of companies interested in the opportunity. The technical issues of setting up an MVNE are similar to those faced by an MVNO. where the MVNE is selling B2B. So. The issue is. 2. but their networks still need minutes from somewhere else. flexible service deployment and the operational simplicity of a hosting service. when they are really wireless resellers. 2. MVNOs are more about customers. access to new service platforms. On the contrary. entertainment and other industries. It's arguable that the major mobile network operators could be opposed to helping MVNOs succeed. The MVNE is emerging because most MNOs have systems and approaches optimized to serve the mass market. where voice is the primary product. These MVNOs tend to differentiate by brand and customer experience.Providers supply components of the service delivery infrastructure to Resellers and Service Providers. MVNEs seek to fill this gap by providing the flexibility to support diverse services provided by a number of segment-specific thirdparties. One of the major issues operators consider with any market segment is risk. the ideal MVNO actually complements and extend the network operator's offering. but usually do not enter into a wholesale agreement with a host MNO. MVNO Page 20 of 110 . so they cannot take on certain customer bases as a result. They both need to support elements of the core network and service delivery platform infrastructure. the large operators are actively chasing markets within their risk threshold. Then there are instances where MVNO and MVNE overlap. These companies tend to be largely prepaid. Whether an MVNO business model is sensible and acceptable to the marketplace is no longer a question. community and content than they are technology. The MVNE offers third-party providers economies of scale. but it's largely a brand play. At one side of the spectrum. The difference is in the customer interface. those MVNOs that succeed will do so largely because their network operator partners have incentive to help them. In fact. such as Virgin Mobile.9 MVNO & MVNE Some companies are mistakenly considering themselves as MVNOs.

however at the same time is a key driver for the MVNO’s need to become known. as they had a brand and shared in the cost. As an example. to ensure MVNO-focused partnerships are complementary to their business in terms of distribution. more money to invest in building future mobile network and application infrastructure. • Another reason MVNOs make sense for operators is that they provide an opportunity to gain strength through relationships with larger. The Walt Disney Co. encourage usage and brand loyalty.like Virgin. Failure Examples - Success Examples MVNO Page 21 of 110 .• Another reason MVNOs make sense for operators is their focus on personalization. o Second. Much of the market is satisfied with a generic plan. o First. control data. successful MVNOs will target segmented audiences that don't threaten their network partners' retail businesses. nor will be so virtual they fail to maximize their customer relationships. All that cost is an undesirable burden to an MNO (specifically for targeting niche markets). Sprint's MVNO partner. they will use content. non-telecom companies interested in MVNOs . customer care support and various kinds of software. in turn. to be spent on advertising. partnerships. Multi-brand concept–tailored to suit the relevant target group. Focus on core services–products and services with well-established demand. Partnerships forged with network operators.all packages. wholesale network and content services. These companies attract or bring with them more content. Affordable prices and straightforward tariffs structures are the cornerstone of all offerings. but promise to add minutes to their networks. The large mobile operators generally offer one-size fits. • The MVNOs that prove successful seem likely to win for three primary reasons. billing and customer interactions. but a growing number of subscribers want something more personal. • Building an MVNO will take an enormous amount of cash. their own brand loyalty and. ultimately. and vice versa: Thus selection criteria must be devised by the MNO. radio and the Internet to create compelling communities of interest that will. • Key success factors for MVNOs The successful development of an MVNO requires the mastery of six key success factors: Possessing a strong brand and being able to transpose it to new markets Disposing of a wide distribution network adapted to the target customers Disposing of a known and addressable existing client basis Bringing to the market innovate offers in terms of price and/or content/services Being customer and service quality oriented Disposing of sufficient financial capacity to establish a long-term presence on the market Must create the right mix of products and services Support it with the correct infrastructure. allowed it to effectively de-risk entrance into the pre-paid youth market. and other media properties. access customers. in addition to platforms like television. they will not underestimate billing and customer care. o Third. Virgin Mobile USA LLC.

12 The MVNO opportunity 2.13 MVNO opportunities increase with 3G rollout 3G offers MVNOs an exciting opportunity to offer users a rich multimedia experience.11 Key driving factors enabling the MVNO opportunity • Western Europe mobile market is reaching saturation since: o in the Nordic countries are already saturated at 90% o the introduction of pre-paid subscriptions has had a large impact • Deregulation opens the mobile markets to competition as: o there is no need for own spectrum licenses or radio networks o there are Regulator-controlled interconnection prices • The focus in revenues is expected to shift from basic services to more content-based value-added services. evolution towards IP over everything o New entrants may have excellence in content-creation o Increasing shift from voice to data services is being observed 2.Focus on a pan-European offering allowing for low-price calling while roaming abroad -. While many of the MVNOs today are offering low-cost pricing (voice and SMS). that could potentially be broadened to include roaming as well MVNO Page 22 of 110 .Focus on offering convergence -. whether based on voice or data. 3G will allow them to focus offerings equally on data.Focus an offering for enterprises. Some of the opportunities identified for potential MVNOs include: -.Focus on 3G and in particular data such as mobile music or mobile sports -.2. So: o There will be Convergence.

their ROI period is not likely to be shorter than 7 years. media partners. Most of the consulting groups predict a shift in the mobile value chain. Traditional 2G Mobile Network Operators tend to keep end user ownership instead of opening their radio access network to MVNOs. The insight Opportunities for MVNOs in Western Europe. According to the most optimistic business cases. Partnership with an MVNO is for them one of the most important success factor. 2.For any new MVNO. Mobile Network Operators have to offer innovative services and deploy them very rapidly on the market. Mobile Network Operators envisage therefore increasing their revenues and optimizing the usage of their network capacity by opening their network to MVNOs. This will certainly provide the company with a competitive advantage and allow it to build its brand and raise awareness in the marketplace. and there are also opportunities for IT companies and those that specialize in data. Mobile Network Operators would face far more difficulties in mastering the UMTS challenge. Where Mobile Network Operators are generating about 90% of their revenues in GSM by selling network capabilities to their subscribers. Due to the investment related to UMTS technology and the price of UMTS licenses in some European countries. because alone. To remain competitive. handling financial transactions (m-commerce) and gaining a lot of new partners (for content. MVNOs are the direct provider of services to their subscribers and not merely an entity that puts its content on the services offered by carriers.14 The overall MVNO business context In 2G. network operators generate about 90% of the revenue by selling voice services and simple data services to their subscribers. Mobile Network Operators are facing pressure from financial institutes in order to reduce their ROI period. in UMTS 40% of the revenues will come out of the broadband wireless data services (portal and content applications). MVNO Page 23 of 110 . Entering the 3G area. analyzes developments in some key Western European countries and major companies. As such the MVNO actively contributes to the business development of Mobile Network Operators (business complementary).). Therefore MVNOs with their respective background can optimally solve some of Mobile Network Operators challenges in the frame of a win-win agreement. MVNOs represent definitively one of the best solutions to their concern. That situation is changing with the introduction of broadband wireless services. It also addresses opportunities for new companies looking to enter this space. m-commerce. it is important to focus on niche markets and get to market sooner rather than later. So the market for MVNOs opens up the space for established and new players such as billing and customer care companies to sell into. As MVNO get ownership of their subscribers they act much more as a full service provider than a content provider. This in turn will allow MVNOs to personalize their data offerings. advertising. which can increase usage and reduce churn. Mobile Network Operators will have to face challenges like managing their new network (new technology). etc. Billing and customer care is just one opportunity.

15 MVNOs Backgrounds (Legacy and Next generation MVNO Models) MVNO backgrounds MVNOs are attractive to companies with strong brands. which usually have not been used previously in the cellular area. The MNOs: • usually have their roots in the fixed line business • leverage on the existing network and ownership of spectrum licenses The MVNOs: • can emerge from a plethora of industries • leverage on strong brands and extensive distribution networks ISPs Fixed network operators Media companies Internet companies MVNOs Retailers Automotive & M2M Niche & Communities Financial institutions MVNO Page 24 of 110 .2. anyone that can offer innovative services and appeal to different demographic sections to target niche sectors and tailor services should be attracted to this market. In particular.

Fixed network operators Media companies Consumer Electronics MVNOs Retailers Automotive Financial institutions Therefore MVNOs in particular may arise from: o Traditional landline operators planning to add mobile services o Mobile operators planning to enter into international markets o Companies with strong brand names o Companies who could not obtain 3G licences o Companies from telecom. media and internet industries Legacy and Next Generation MVNOs MVNO Page 25 of 110 .Another pictorial way of seeing the MVNOs entrants’ background can be seen below.

graphics and video information. For example.2. supporting MVNOs brings with it burdens and risks for the operators. Three essential factors have emerged: 1. On paper MVNOs present operators with a way to realise revenue from spare capacity and target niche markets that are peripheral to their core business. MVNOs must differentiate themselves with new value-added services orientated around customer choice and a personalised customer experience. Convergence has become the new driving force behind the Next-Generation of MVNOs. Helio a US MVNO now offers its customers GPS-enabled Google Maps. 3. data. OTA music downloads and exclusive access to MySpace Mobile at no charge. broadband and TV. Virgin Media is now offering a quadruple play package. their offerings are not very different than traditional mobile operators. MVNOs need to execute effective mobile data strategies and create innovative ways to differentiate their services to high-margin multimedia. As the voice ARPU declines. mobile TV. to get revenues from the mobile market. An MVNO usually offers not only voice services but also value-added services or sometimes referred as mobile value-added services. location based and mobile commerce services. mobile commerce and location-based services. Examples include mobile music. which are a combination of voice. ring tones. For example. games. multimedia messaging. Qualifying the business cases of potential MVNOs to a network provider can therefore be time-consuming and distracting 2. However.16 Where is the MVNO today An explosion of the MVNO activity is taking place in the mobile marketplace. today’s MVNOs are far from achieving a license to print money. Many players from multiple industries are exploiting the MVNO model. While many MVNOs have entered the mobile market on a “pure voice play”.17 Next generation MVNOs MVNO Page 26 of 110 . 2. While the initial business model of creating new revenue streams without actually having to be an expert in the wireless industry still stands. combining mobile and fixed line telephone services.

nor will they be ad-hoc creations that require integration into the host MNO. If initially MVNOs offer simple discounted prepaid voice and SMS services. nor duplicate exact elements of the host MNO. The “Next generation MVNO” concept as evolution of existing first generation MVNO business model. offer sophisticated voice and data services and differentiate on services. except radio access. this is to take into account the recent rise of convergence. but instead they will all reside on a single platform that interfaces with the Host MNO and grows infrastructure around its individual customer needs and requirements in order to never become a potential burden to its host MNO. Note the fact that the MVNO model now goes beyond the Radio Access & Transmission element. on opposite next generation MVNOs is going to have all GSM/UMTS network elements. MVNO Next generation Concept The "Next generation MVNO" concept refers to the creation of a global network with Europe wide coverage. not licensed spectrum. innovations. data offerings and customer care. These will therefore be unlicensed Radio Access & Transmission elements. does not have infrastructure and act as host network resellers under their brand. MVNO Page 27 of 110 .MVNO Next generation preface Next Generation MVNOs in general do not necessarily invest in. consisting from all GSM/UMTS network elements. and centralized service platform. connected by broadband network and binded with each countries incumbents through interconnection agreements. based on completely different approaches: a transition away from price competition toward innovative and higher-value services. except radio access.

MVNOs: Identities and Distribution 3.3.1 MVNOS Global Initiative Description The “MVNO Global” initiative is to create Pan-Europe global alternative GSM/UMTS mobile operator and service enabler using full infrastructure Mobile Virtual Network Operator (MVNO) concept. MVNO Page 28 of 110 . Since the “de jure” EU is single market. The global footprint of operator should cover EU25 countries and beyond. performing unified and centralized service platform. one from each country. “de facto” we still have very defragmented mobile market with considerable roaming and global services(112 and in vehicle emergency call service) implementation problems. Also to introduce and complete consolidation by horizontal merger of existing MVNO’s. “MVNO Global” strategy is to be build in EU’s “Lisbon Strategy” framework which strives to turn the EU into the world's most dynamic and competitive economy till 2010. rich and diverse content and digital services. “MVNO Global” mission is to promote and be the part of Single European Information Space offering affordable and secure high bandwidth communications. and rising funds to expand globally. other MVNO’s and service and content providers willing to start global operations on company’s technical platform. The industry players The target market is medium and high-end business and residential users.

List of countries involved in project depending from implementation time frame: MVNO Page 29 of 110 . In third stage other countries networks will be developed and connected.MVNO Global footprint At first stage of project analysis of EU15 countries mobile markets will be performed in order to identify mobile market alternative key players and select those will be invited to negotiate aspects of fore coming merging process. Throughout second stage all separate networks and service offerings will be upgraded to developed standardized platform.

• The companies should come together to benefit from economies of scale. Finland and Sweden.Mobile internationalization EUROPE Next Gen MVNO Transition process Benefits for existing MVNOs (According to Global Initiative) To create shareholder value over and above that of the sum of the companies. lowering the costs of the company and increasing profit. • This rationale is particularly alluring to existing MVNO’s and SP’s operating in tough mobile markets like Denmark. thus reducing duplicate departments or operations. hence companies together are more valuable than separate companies. centralized service platform and value of global brand name. MVNO Page 30 of 110 . • The companies in addition benefit from synergy: better use of complementary resources.

HLR. etc. Roaming agreements should be signed to rest of the worlds GSM networks. Centralized and unified LBS. MVNO Global network topology MVNO Global network should consist from GMSC equipment in each country connected to each other by broadband connections. 3. WAP. Centralized customer care and billing applications.2 MVNO Global market share MVNO Page 31 of 110 .Technical platform • • • • • • FULL infrastructure MVNO model: GMSC. SIM cards Java toolkit. OTA platform implementation. In each country Global MVNO should have its own MNC and IMSI range. Service platform and applications should be centralized. SMSC. as much it is technically possible in order to reduce CAPEX. Each country’s GMSC is connected to other incumbent operators under terms of interconnection agreements. Every GMSC should be connected to countries MNO: host mobile network operator. MMSC.

Israel.Planned MVNOs . Zanzibar . USA Rest of the World . South Africa.53 (not regionalised) The global market for MVNOs will reach 150 million subscribers by 2013. Singapore. Réunion. Russia. Taiwan. Japan. Dutch Antilles. Hong Kong.3 The Future of MVNOs in the 3G Era 2006 Market Map: European MVNO 3. Malaysia. Ukraine (linked to Russia).3.0 Source: FirstPartner 2007 3. New Zealand. with 63 million of those subscriptions coming from Western Europe. This will result in MVNOs accounting for a 3% market share of the total mobile market by 2013.4 Global MVNO Distribution North America . MVNO Page 32 of 110 .63 MVNOs Canada.41 MVNOs Australia.

shifting end-user demand trends and possible changes in the supply environment.5 MVNO Global Market Forecast (2006-2012) The global MVNO market from 2007 is likely to be impacted due to technological factors.5.3.1 The Customer Segments MVNO Page 33 of 110 . 3.

this provides a basis to offer a common look and feel to their services.3 MVNO business Models The sort of companies most likely to become a virtual operator could be: . Also.2 The Revenue Model (an example) 3.5. . Building on this would enable such companies to offer a degree of mobility to their fixed network customers and reduce their cost base for calls made from and between countries in which they operate. All those fixed network operators that failed to win 3G licences then. if they weren’t currently strapped for cash.3.Companies with fixed network licences in several countries and its own international backbone.Another likely profile would clearly be a well-known company wishing to capitalise on its brand name and with a strong customer base The most established business models are focusing on the support of services and customers MVNO Page 34 of 110 .5.

unlimited call tariffs & SMS bulk bundles SIM locking Difficulty in setting appropriate relationships with handset vendors Traditional MVNOs Rigid wholesale contracts Lean staffing structure Selected channels Simple products Very easy to understand tariff SAC lower than MNO Lower ARPU than MNO MVNO Page 35 of 110 .MNOs gain access to customers that are difficult to target .Less time to cash flow breakeven .Lower operating margin and capex vs. MNOs .Source: FirstPartner MVNO Business Case .Content / brand owners can enhance & extend the wireless market MVNO Risks Unfavourable wholesale agreement & restrictions Hostile pricing by MNOs .

Next Gen MVNOs Flexible wholesale contracts Dedicated customer care team Augmented distribution capacity Innovative content and service offerings Flexible tariff SAC similar to MNO Higher ARPU than MNO Fixed Telephony possible MVNO models MVNO Page 36 of 110 .

while for the rest is another opportunity In MVNOs mature countries the ratio MVNO/MNO is approximately 5:7 MVNO Page 37 of 110 . 2007) Fixed Operators are the only ones with experience in both voice and data services.Source: AGCOM 2007 –MERRILL LYNCH 2007 ACCENTURE ANALYSIS (Nov.

Full MVNOs and Service Providers constitute approximately 69% of the total MVNOs number. Germany that has the higher MVNO penetration. 9% UK mobile revenue Source: FirstPartner MVNO Market Trends MVNO Page 38 of 110 . full MVNOs possess 30% of the total.For the above sample of European Countries (the most mature). MVNOs distribution per country and market segment Europe presents different business models per country. the highest price reduction is observed (due to competition).5m MVNO subscribers. Source: Accenture analysis (Nov 2007) MVNO Subscriber Forecast Western Europe: 13m subscribers in 2005. 13% of UK mobile users. 47m by 2009 UK: 5.

thus increasing their market share through the MVNOs (selling air-time in bulk).MNOs may sell their network extra bandwidth. etc).Source: FirstPartner MVNOs do not pose a treat MNOs . as well as cover the subscriber acquisition cost (SAC). Mobile Penetration in Europe and Greece Source: SATPE MVNO Page 39 of 110 .The MVNOs profit margins (by buying bulk) may aid financially both the MNOs network deployment investments (UMTS. .

6 MVNO Adoption in Europe . Italy. Spain.6. France.151 MVNOs Portugal. UK Austria. Latvia.1 Fixed telephony MVNOs in Europe MVNO Page 40 of 110 . Lithuania. Luxembourg. Switzerland. Liechtenstein. Sweden. Greece. Estonia. Belgium.3. Poland MVNOs in Europe have reached different maturity levels and are concentrated in northern Europe Source: Accenture analysis (Nov 2007) 3. The Netherlands. Slovenia. Finland. Denmark. Norway. Germany. Iceland.

very few successes MVNO Page 41 of 110 .6.3 MVNOs in Europe: numerous initiatives.6.2 MVNO/MNO European Market share Source: Accenture analysis (Nov 2007) 3.3.

MoMAD Some Smaller . CALL DIVERT.3. MISSED CALL NOTIFICATION.Ciao (needs of an ethnic group) Powered by WIND -Q .7.Services: SMS. CALL LINE IDENTIFICATION.AB mobile . EMERGENCY SERVICES.Carrefour Frog Mobile . ROAMING MVNO Page 42 of 110 .Olympiakos . CALL BARRING. such as: • very low rates from the first second • very cheap SMS from the first message • very cheap MMS from the first message . MMS.Frog . CALL LINE IDENTIFICATION RESTRICTION.1 The MVNOs in Greece 4 Larger Powered by Cosmote .7 MVNO Adoption in Greece There are four Larger and a few small MVNOs. 3.Coverage (the best in the country) .Small description The new prepaid mobile telephony offers very cheap rates.

11 Source: Companies Announcements MVNO Page 43 of 110 .Small description The dynamic prepaid mobile telephony offers very cheap rates.96 New Connections (Q2) 392. WAP. MO Portal.776 Hellas Total 17.00 32. Java Games. Happenings. Value Added Services.Small description A pioneering prepaid offering targeting • Youth • music lovers offering unique services in the music and showbiz areas with • very cheap SMS • very cheap MMS .22 35. MAD MMS news. Daily SMS.2 Mobile Network Operators customer base (June 2008) Total Connections Cosmote 6. SMS. SMS.638 731. Music news.Coverage (Country-wide coverage) .04 27.920.000 Wind 4. Roaming Q . 3.Services: Basic mobile services.298.412 82. e-mail.907 Vodafone 5.Ciao . MAD programme.542. Roaming. MMS. MyQ services Mo-MAD .Services: Cheap bundle of voice and SMS towards mobiles of a certain foreign network.050 Market Share (%) 53.683 Market Share (%) 40.Coverage (the best in the country) .67 11. Roaming. MMS.Small description This mobile offering targets certain ethnic group by providing: • Very cheap rates towards all mobile and fixed destinations in Greece • Cheaper rates for calls towards Greece.000 256. who-called.Coverage (Country-wide coverage) . USA. Albania and Italy • Cheaper rates for calls towards CIAO numbers • very cheap SMS (same price for Greece and abroad) .Services: Ring Me now. Ringtones.7. Voice Portals.835. music charts. such as • per second charging (from the first second) • very cheap national calls • Cheap rates towards 25 European destinations • very cheap SMS • very cheap MMS • no monthly fees .

7.7.000 519.000 32.00 692.2 € 22 € 19.4 Minutes Data refers to Q1 of 2008 * Figure results from data provided by Vodafone for the period April-June 2008.3.542.9 € AMOU 183 Minutes 144 Minutes * 125.920.4 MNOs ARPU and AMOU Cosmote Vodafone Wind Hellas ARPU 24.96 5.907 40.3 MVNO Figures MVNOs Cosmote FROG CIAO Vodafone OLYMPIAKOS CARREFOUR Wind Hellas Q MoMAD AB Σύνολο Low Cost Life Style Low Cost Community Low Cost 4.000 4% 35.000.2% 5.683 27.835.000 0. according to which the total traffic in this network was 2. Source: Weekly Telecom Magazine (Companies Announcements) MVNO Page 44 of 110 .78 3% Low Cost Community MVNO Type Total Market Share on total Subscriptions subscriptions (%) 6.000 17.776 1.542 Million.04 3.395 billion minutes and the customer base was 5.298.

according to their MVNO solutions: MVNO Page 45 of 110 .1 Advantages/ Benefits For the MVNO model Significantly reduced time-to-market for launching MVNO service Accelerated ROI and reduced TCO for both MVNO and Wireless Carriers launching a branded wireless service Faster time-to-market with new products and services Accelerated ability to launch new campaign and promotions Fast-track release process designed to accelerate time-to-market for enhancements Accelerated integration of additional partners and applications due to a highly flexible serviceoriented architecture Host Operators have traditionally struggled in understanding what their customers want. which could cannibalize host carrier customers. According to Pyramid Research. Given the importance of recouping high investment costs this is an increasingly important consideration. For the MNO For Host Operators.g. An MVNO can. customer service functions or content to attract new customers who would not necessarily be attracted to the existing Host Operator. branding and marketing expertise. the UK supermarket chain Sainsbury’s has become an MVNO offering a branded cellular service to its customers). Everything considered equal. Host Operators have also generally proved poor at understanding what content will attract new subscribers. The concept also appeals to operators with fixed capacity as offering the opportunity to offer a combined fixed and cellular service with one tariff and one bill and discounted rates to customers who subscribe to both services. there are three main categories of MVNEs. the MVNO is afforded the opportunity to customize its offerings arguably further than an MVNO that is totally reliant on the host mobile network operator. MVNO/ MNO/ MVNE Benefits and Drawbacks 4. The model can be used by cellular operators seeking to expand their geographic reach as well as by brands which are sufficiently strong to leverage consumer loyalty across markets (e. Given the importance of such multimedia services to the future of the cellular market.4. an MVNO could literally use the host mobile network for only radio and switching infrastructure. MVNOs offer the possibility that traffic on their network will be increased as they offer capacity on a wholesale basis. For the MVNE The benefit that the MVNE can provide to the MVNO is deferral of capital expenditures and/or cost reductions while allowing the MVNO to focus on the customer relationships rather than operations. High "chum" rates (customers charging operators) is just one indication of a market where customers have little loyalty to their operator. outsourcing everything else to the MVNE. exploit factors such as a superior brand. but is not interested helping the MVNO differentiates itself. the host operator is satisfied to sell unused capacity. therefore. At the same time. using established companies as MVNO may be a profitable way of exploiting the knowledge of others.. With an MVNE. MVNOs offer a way of addressing areas of the market which would not be reached by Host Operators as well as providing innovative services.

strong brand MVNO is transforming the dynamics of the MVNE market. • Specialised Enablers: these offer only parts of the back-office network such as messaging platforms. . . that by permitting access to their network they are permitting the creation of a competitor which will lead to a reduction in their subscriber base. will have all the benefits of being an operator without any balancing licensing obligations. its core network.MVNOs.There are also clear and understandable security concerns regarding giving an outsider access to the operator’s most important and expensive asset. They are not solely focused on the MVNO market. they choose to won more of their platforms. . and have complemented them with partnerships to provide end-to-end enablement services. data platforms and billing solutions. Some have found that providing even a "virtual" network is prohibitive. therefore. the Host Operator and any third-party content provider. These promote their ability to quickly provide orderto-cash solutions to MVNOs. The voice-centric. For the MNO . The new breed high-end.• Aggregator MVNEs: these offer consulting and integration services and have bundled all of the back-office network components through alliances. . a critical prerequisite to success that the Host Operator is convinced that the selling power of the MVNO name can be used to increase the number of customers on the Host Operator’s network by attracting new subscribers that the Host Operator would not have been likely to attract or by churning customers away from other networks.2 Disadvantages/ Drawbacks For the MVNO model Despite the positive features outlined above. 4. Besides leveraging their own existing assets. particularly their logistics.The most significant problem is the basic conflict which Host Operators face.MVNOs themselves face significant problems in constructing a coherent business case.There is the fear that permitting MVNO "first mover" advantage in the provision of lucrative data services will mean the Host Operator will become a "dumb pipe" starved of these extra revenues. . distribution and customer care systems. but they tend to opt for specialised ones with bestof-breed solutions and a strong reputation. there are a number of recurring issues which have led many to conclude that this model has significant flaws.The greater degree to which the MVNO relies on the Host Operator for these services the lesser the possibility for service differentiation to diminish as the MVNO increasingly resembles the operator whose network it uses.MVNOs must also develop intelligent billing systems which can accurately charge subscribers and also split complex financial transactions between the MVNO itself. as a largely unregulated area of the market. . operationally "light" MVNOs of today have generally worked with an aggregator MVNE that managed the limited back-end operations on behalf of the MVNO. It is. MVNO Page 46 of 110 . They still work with MVNEs.Costs of equipment are high and may make the project uneconomical given that volume discounts may not be available to new entrants. • Aggregator MVNEs with their own platforms: this includes aggregators which have developed one or more back-office solutions internally. .

in-sourcing of operations by the MVNO may cost dearly Advantages and disadvantages of Discount MVNO revealed in the value chain MVNO Page 47 of 110 .In case of disagreement in the future.For the MVNE .The MVNO feels that they are dependent on an external party .

provisioning etc • However. making MNO/ MVNO integration more difficult o MVNO having to deal with many partners.1 MVNE trends Europe vs. application hosting.4. The MVNE solution appears very much to be ‘pick and mix’ with MVNOs being able to choose the different elements depending on their own in-house capabilities. customer care. MNO having to integrate with all of them! • The US the market is about MNO and MVNE relationships o MVNEs in the United States provide at a minimum the basic connectivity and infrastructure that allows an MVNO to launch a service o The MVNE lets the MVNO to concentrate on their core competency –marketing to a targeted customer segment o MVNE services range from the barebones cookie-cutter model to an elaborate menu of countless options • Less fragmentation = smoother integration o MNO retains control of network integration 4. many companies have since adopted the MVNE solution o Resulting in fragmented market o Many MVNEs no longer have airtime agreements with the MNOs -MVNO left to organise this themselves o Only providing part of the solution.2. US • In Europe MVNEs initially provided turnkey solutions o The “middlemen” -between MNO and MVNO– o Providing airtime as well as billing.2.2 MVNE Uses in Europe The degree to which an MVNO will outsource its operational activities depends on what its existing revenue streams are. MVNO Page 48 of 110 .

3 MVNO-MVNE-MNO Functional Model MVNOs need to control back office costs without sacrificing quality. who in turn runs most of the MVNO operation • The key issue is the customer perception • Customer only sees the MVNO brand. So regarding: Cost: Start-up expense should be limited so funding can be used for brand development–Incremental costs for capacity increases Quality: • Support systems should be scalable without lengthy delays to avoid service issues • Consistent user experience during the upgrade process should be available • Long-term high volume capability should be ensured MVNO Page 49 of 110 .2. not the operational workings behind the scenes 4.• Typically MVNE customers are brand owners with little or no telecoms experience • Wants to outsource rather than operate the MVNO in-house • The MNO deals with the MVNE.

concerns about overcapacity and potential consolidation are emerging. but is arguable whether this is enough to sustain the MVNO business model. MVNO Page 50 of 110 . ARPU. MVNEs will benefit of such an expansion. MVNOs have to improve one or more of the following wireless operating metrics in order to make money: CPGA (cost per gross acquisition). at least in its initial iterations. Virgin-like players.4 Viability of Virtual Mobile Players Overview The mobile virtual network operator (MVNO) model has gained popularity over the past years. Virgin Mobile UK is profitable (more of an exception than a rule) but the company has been in operation since 1999. If. with the MVNO model going through a number of iterations. CCPU (cash cost per user).com it was found that the MVNO model is a lot less financially attractive than the hype would suggest. the MVNO space is dominated by a small number of large. Today. MVNO service revenue has been expanding in line with the growth of virtual operator subscriber bases. and churn. Available MVNO data certainly provides enough fodder to question the MVNO model.2. If the MVNO segment moves towards a fragmented marketplace with dozens of players serving small niche segments.wimax-industry. by contrast.Reference: 4. It is believed that most other MVNOs are at the loss-making to slightly above break-even level. MVNOs financial attractiveness Based on an analysis by www. in both the MVNO and MVNE spaces. more ventures have followed in Virgin’s path (the model’s pioneer). The future of MVNEs The future of the aggregator MVNE hinges on the development of small. niche MVNOs. the future of the aggregator MVNE becomes somewhat doubtful.

5 Sustainability Sustainability of the MVNO business models will depend on where the company setting up the MVNO business. The three groups are called Retailer.2. like Virgin Mobile started as a challenger and are now becoming brand leaders. This is not compatible with trying to own all areas. most mobile operators' brands are all over this matrix. given that the companies are grouped into three types: a) Companies originating from outside the Information and Communication Technology (ICT) Industry.2. but not as a telecommunication network operator. Expander and Integrator respectively. and c) Companies originating from inside the ICT industry. originates from. the brand identity type classification may look as follows: Follower 1) Frog Mobile as: o they are housed by an MNO (operational from the past) o Compete on price o They don’t have a competitive advantage o They don’t have a clear product differentiation MVNO Page 51 of 110 . Note that successful MVNOs.4. sectors and parts of the market with just one brand. whilst minimising any association with the "follower" values. as most mobile operators do today.6 Brand identity in Mobile Services For a brand to have any value it must mean something to the customer and to do so it needs to be exclusive. Regarding the Greek MVNO market. 4. b) Companies originating from inside the traditional telecommunication industry. Because of this.

o 2) Q Prepay o o Brand is not distinguishable from competition Lives on the legacy of Q-Telecom Competes on price or promotion 3) AB Prepay o Not premium competitive advantage o Not clearly defined customer base o Unclear product differentiation 4) Carrefour Prepay o Not premium competitive advantage o Not clearly defined customer base o Unclear product differentiation Challenger 1) Ciao mobile as: o targets a gap in the market (needs of a specific ethnic group) o strategy focused on customer needs 2) Mo-MAD o Targets a gap in the market (music funs mobile services needs) o Identifiable brand (MTV) o Well defined customer base 3) Olympiakos Prepay o Targets a gap in the market (football funs mobile services needs) o Identifiable brand (Olympiakos) o Well defined customer base 4. An example of this was seen in Sweden where the incumbent 2G operator Telia concluded an agreement in January 2001 with Swedish 3G Swedish licence holder Tele2 AB in order to access this new market.7 Type of Companies attracted to the MVNO Model MVNOs are attractive to companies with strong brands. MVNO Page 52 of 110 . which usually have not been used previously in the cellular area.2. anyone that can offer innovative services and appeal to different demographic sections to target niche sectors and tailor services should be attracted to this market. In particular. Some corporations already active in other areas of the telecoms sector are attracted to the model. some established fixed line and broadband network operators are using the concept to offer customers bundled cellular services. European cellular companies that were unsuccessful in acquiring 3G licences and require a pan-European network are attracted to the concept as a costeffective way of filling gaps in coverage. In the United Kingdom.

9 VALUE TO MNO & MVNO .2.Market segment .2.Distribution channels .MNO focus on its core branded offer Screen opportunities .Specific traffic usage .On the shelves technologies and services Financial advantages .4.Field trial with light integration work for MNO .Lower upfront and operating costs and investments Multi-country access MVNE positioning MVNO Page 53 of 110 .« Plug & play » interconnection .Innovation & differentiated services .Easy start .Risk reduction 4.Differentiated services 4.Outsourcing of MVNO business and technical operational management .Critical mass in expertise & skills .10 VALUE TO MVNO Operational MVNE Platform and team .8 VALUE TO MNO Complexity reduction .Business development .Agreements with GSM operators .2.Mutualisation of investment between MVNOs customers .Time-to-market .Economies of scale .MVNO candidate education Refinement of project to adapt MNO objectives .

as it conventionally covers a range of different business approaches to providing mobile services. to offer leading edge services and to create and capture new markets. There are three emerging and commonly accepted operating models: the Reseller.11 Different approaches to mobile services The Full MVNO model suits businesses that aim to engage fully in the telecommunications industry. as illustrated in Figure 1. The growth in MVNOs has also created the opportunity for MVNEs. MVNO Page 54 of 110 .4. to act as an interface between a Reseller or Service Operator and a host MNO. “MVNO” is a potentially confusing term.2. the Service Operator and the Full MVNO.

This is because the control provided by the Full MVNO model may offer better short term and long term opportunities. and also achieve a high degree of independence at the outset. by differentiating themselves from other players in those segments through innovation in pricing or service content or both. shown in Figure 2. with campaign pricing to kick-start the take-up of services. by adopting the Full MVNO model. • However. the various MVNO operating models fit with the MVNO business models as follows: The Reseller model suits an organization that can leverage its existing distribution channels to sell mobile services. business models. Such projects can easily take more than a year. The benefits. procure and implement the underlying solutions. both in terms of pricing and service innovation. • The Full MVNO suits players aiming to achieve additional differentiation from Service Operators and MNOs. the Full MVNO model may be the best approach for some players who would otherwise select the Reseller or Service Operator models and introduce differentiating services into their offering at a later date.Choosing the right approach The choice of MVNO operating model is complex. Acting as a Reseller or Service Operator would often mean persuading the host MNO to plan. by offering leading edge products and services. the MVNO would have full control of services decisions. This would mean implementing service offerings within the host MNOs infrastructure but with differentiated billing. Typically this means no-frills voice and messaging services. The Full MVNO would be in full control to ensure timely introduction of services. negating the clear advantage of flexibility. Generally. an MVNO may want to introduce an innovative bundle of video call. For example. • The Service Operator model suits those organizations that wish to gain control over the services they provide. but has little need to innovate in the services it provides or differentiate itself from other players. However. source. responsiveness and speed. This means the Service Operator model suits players that seek to address specific customer segments. pricing and promotion to the market. delivery models (for example hosted services) and the project’s timelines. MVNO Page 55 of 110 . push-to-talk and other value added services. need to be weighed against the issues of operator acceptance and infrastructure complexity.

There is a gradual evolution towards the Full MVNO model by both existing and new third-party mobile service providers. service and delivery.2. through the additional wholesale volumes. This approach may also allow the host MNO to concentrate on developing its core brand value. Planning the service offering typically involves: Definition of the target market Selection of appropriate services and service charges for the target market Ensuring. The Full MVNO may also reduce complexity in the MNOs wholesale interface. confirming the viability of the plan. that the products and services reflect the brand’s core values While service offering goes a long way towards determining the appropriate MVNO model and the required investment in infrastructure. without diluting it with multiple service offerings. designing business and technology systems. the gradual expansion towards a service oriented model focusing on service differentiation and segmentation is being driven by: Market saturation Increased end-user and network competition A focus on customer differentiation and customer loyalty 3G service opportunities and new wireless access technologies The separation of access and services Regulatory pressure The value of service bundles in strengthening competitiveness and dealing with competitive elements As a result. In addition to the advantages of the Full MVNO model already discussed. 4. because they own their customers and can switch networks. This section provides an overview of these items. Although this may be a potential barrier from the host MNOs perspective. because the Full MVNO simply requires access to the RAN and handles all other service aspects. Issues such as service delivery and Quality of Service. Full MVNOs are likely to play an increasingly important role in providing mobile services across several markets. there are a number of decisions and processes that are unique to the MVNO and MVNE. a service provider can adapt to market changes and obtain a competitive edge. in a way that a Reseller or Service Operator would not achieve. Another key advantage of the Full MVNO model for Resellers and Service Operators is the leverage they gain in negotiating wholesale rates. customer support. Effective planning is built on a solid understanding of the commercial or consumer mobile telecommunications market and is essential to determine both the service offering and the appropriate operating model. including billing. for an existing brand.12 Execution & Fulfilment Launching an MVNO or MVNE involves many of the practices and processes required to implement any new business: business planning.13 Business Planning Good planning is essential for an MVNO or MVNE. number portability management and regulatory requirements help to MVNO Page 56 of 110 .2. assurance. More customers may allow the host MNO to make more efficient use of its Radio Access Network (RAN). 4. provisioning.As a Full MVNO. it is balanced by significant advantages to the host MNO. and then managing it for growth. However. interconnection management. the level of knowledge and experience within the telecommunications industry must also be considered. implementing the business.

either direct from the manufacturer or using an established distributor. and the marketing of new services and offerings. Value added services – A service-focused MVNO will need to select service platforms and end-toend solutions for creating a differentiated portfolio of end-user services. Targeted pricing plan steps 1. Mobile Blogging.determine how much of the Full MVNO model should be adopted. Gross life-time value should take into account only the value of the offer. 4. Ongoing management of this relationship is vital. sources for this content and download platforms must be found. Instant Messaging. estimate the potential market size for the offer. and retention gains. In the case of offers that are add-ons to existing plans. handset provision and servicing. while net life-time value discounts the value lost due to cannibalization of existing plans. Location Based Services. Streaming video.15 Business Infrastructure The business infrastructure that any MVNO or MVNE will need to design includes: Host MNO selection – A host MNO must be located and contracts drawn up to cover commercial and technical aspects. Mobile phones – Suppliers of mobile phones will need to be found. In addition. First describe each offer. cannibalization levels. sourcing existing content from a developer or content aggregator. Content services – Where end-user services involve content delivery. Mobile TV. calculate gross and net subscriber life-time value. It may also include systems to manage downloads and billing. 2. 4. its targeted segments. as well as richer communications services such as Push-to-talk Over Cellular (PoC) / push-to-X.2. Core business systems – As well as standard accounting and operational business systems.2. an MVNO or MVNE will need to manage customer facing logistics. or locating a developer or designer to create bespoke content. This may involve engineering existing content for mobile. or purchased as a service from an MVNE. Technical Infrastructure The technical infrastructure must be identified. and list current competitive benchmarks from major carriers/competitors (both MNOs and MVNOs). in-house but using a managed service. entirely in-house. management of the customer lifecycle. Finally. 3. out-sourced but owned by the business. including: Core network systems Service delivery platforms MVNO Page 57 of 110 . Email. At the end of this process the business should know what to offer customers and the infrastructure that is needed. Add justification for the offer by identifying a unique value proposition for the targeted segment. it is prudent to make a decision about how the infrastructure will be managed. 4. including retail outlets. Next. While these issues need to be considered by a prospective MVNO they are clearly fundamental for an MVNE. Presence and more. A Services portfolio may consist of SMS and MMS services. it is simply the incremental value of the offer. Also conduct a sensitivity analysis of net life-time value (LTV) to different price points.14 Business Design Once the business plan has been validated and the go-ahead approved. the supporting business and technology systems can be designed and the detailed implementation can be created.

other networks and service operators. These activities might include: • Competitive analysis. processes and procedures are required to monitor marketplace performance to ensure existing services remain competitive and new ones are developed. maintaining a fresh catalogue for content based services • New services definition and deployment. interoperability. for service delivery platforms and core network infrastructure Managed Services. as well as common support systems. as well as firmware and software maintenance Performance monitoring.2. legal interception. maintaining intelligence on market competitors • New technology analysis. Nokia Siemens Networks is in a unique position to offer support. retiring old services and ensuring customer migration to new services Finding the right business partner can be the key to success for an MVNO or MVNE. to ensure that the appropriate quality of service is being provided Load balancing and other activities to maintain quality of service and optimize use of the infrastructure. design and implementation Page 58 of 110 MVNO . As a supplier to more than 600 mobile. interconnection with other networks and roaming arrangements. billing and care. including both physical maintenance and repair. interconnection and performance testing Data conversion from existing systems Delivery system content population Live deployment and switch-over 4. maintaining intelligence on emerging technologies • New content acquisition.Customer relationship management Systems (CRM) Billing systems Customer care systems Network management These systems must be interfaced with the host MNOs infrastructure. innovative and proven solutions for value added services Infrastructure hardware. an implementation plan can be devised and executed.16 Production Support Production support includes day-today operational activities such as: Hardware maintenance. flexible and pre-integrated solutions with advanced and rich connectivity to support interfaces to all networks for MNO and MVNO voice and data services Consulting services. In addition. for full off-site hosted service of applications and infrastructure Convergent online charging. Nokia Siemens Networks’ world-leading experience in all areas of the mobile industry offers a low risk approach. such as a number portability platform. for on-site management of infrastructure components Mobility Hosting. identifying and implementing new services for the target market • Service retirement. fixed and hybrid customers in 150 countries. The key Nokia Siemens Networks products and services include: • • • • • • Mobile services. The critical activities will include: Service specification and testing Interface development and testing Hardware and software procurement and installation Hardware and software integration System. integration. Implementation Once the business and technical infrastructure has been defined. for business and technical planning.

infrastructure. and close control over the service. any player must create the right mix of products and services.2. • Build success through strong collaboration – Nokia Siemens Networks build long lasting collaboration with its customers and invests to ensure success for both parties. coupled with familiarity with all the components within the MVNO/ MVNE operation. Low OPEX and CAPEX services improve the MVNO’s ability to properly manage its business case. In choosing an infrastructure partner. While many businesses will be served well by implementing Reseller and Service Operators MVNO models.17 Conclusion As traditional MNOs concentrate on optimizing their Radio Access Network usage and delivering mass market systems. the Full MVNO operating model offers compelling advantages. with compound annual growth rates of between 8% and 20%. and support it with the correct infrastructure. an MVNO or MVNE needs to consider the depth and breadth of mobile telecommunications skills that their partner brings to the venture. the ability to terminate calls. To be successful as an MVNO. a Full MVNO offers the greatest flexibility in going-to-market and then sustaining long term growth. 4. systems integration and solutions. Ovum estimated in 2005 that by 2009 around 10% of all mobile subscribers could be served by an MVNO. MVNO Page 59 of 110 . With full ownership of the customer. The ability to call on business and technical expertise from any discipline within the infrastructure domain helps to avoid roadblocks. the scope for MVNOs and MVNEs is increasing. regardless of the underlying service offering.• Terminal. allow Nokia Siemens Networks to ensure the delivery of optimum solutions • Reduce risk – Nokia Siemens Networks’ years of industry experience means much lower risk. billing. proven partners ease the operational challenges and provide quick deployment Remove complexity – Marketleading offerings and experience across mobile software platforms. device and mobile computing configuration management Nokia Siemens Networks’ experience in helping businesses deliver successful mobile products and services to consumers worldwide allows it to: • Enable fast time to market – Nokia Siemens Networks and its strong.

19 - Host MNO Benefits Sell unused 3G network capacity through more than 1 MVNO Increase non-SMS Data ARPU Wholesale more profitable than retail customers if MVNO marketing more cost-efficient Enter All-over-IP market with zero risk for MNO brand and core Voice/SMS business Page 60 of 110 MVNO .18 MNO Motivations (to host MVNOs) There are three primary motivations for mobile operators to allow MVNOs on their networks. . MVNOs are a way to implement a more specific marketing mix. sales.Future Outlook B u s i n e s s P o t e n ti a l - Value Seekers A2P2A is mass application Followers Value added services Powerful competing technologies Early Adopters Real-time processing Touch-point Integration 2004 2006 2008 2010 Reference: Mobile Economy 4.2. whether alone or with partners and they can help attack specific. . help fight churn.Product-Driven Strategies – MVNOs can help mobile operators target customers with specialised service requirements and get to customer niches that mobile operators cannot get to. The opportunity for mobile operators to take advantage of MVNOs generally outweighs the competitive threat 4.Segmentation-Driven Strategies – mobile operators often find it difficult to succeed in all customer segments. targeted segments. grow average revenue per user by providing new applications and tariff plans and also can help with difficult issues like how to deal with fixed-mobile convergence by allowing MVNOs to try out more experimental projects and applications. marketing). These are generally: .Network Utilisation-Driven Strategies – Many mobile operators have capacity. customer service. An MVNO strategy can generate economies of scale for better network utilisation. product and segment needs – especially in new areas like 3G.2. MVNO models mean lower operational costs for mobile operators (billing.

22 The MNO Perspective Reaching more segments. expanding share through non-traditional channels. VoIP – all applications.- Inexpensive international data roaming for M(V)NO subs thanks to Multi-IMSI solution Preferred network for international OPEN visitors thanks to Multi-IMSI solution 4.2. MVNO Page 61 of 110 .60% : MVNO/MVNE . open ports.2.40% Competitive data wholesale pricing Target GB retail pricing: 10-15 Euro MVNO/MVNE with HLR and own IMSI range in each country No upfront interconnection payment 4.21 Host MNO Wholesale Business Potential (Example) Even the biggest MNO in Germany could benefit from selling data capacity to OPEN or other MVNOs if customer churn (in and out) was proportional to market share 4. no packet filtering Revenue Sharing: MNO . extracting attractive subscriber economics and stimulating mobile data take-up and usage are four major drivers behind the push by Mobile Network Operators (MNOs) to embrace MVNOs.20 - Host MNO Requirements Direct connectivity to OPEN MVNO/MVNE All-over-IP incl.2.

Third. investors may also view MVNOs as complementing their other businesses by adding value to existing offers and leveraging existing assets. applicability of existing relevant assets and attractive economics are among the factors encouraging private labels to consider MVNOs. religion minorities. MVNO Page 62 of 110 . 4. ethnic minorities. Cable providers have the potential to upsell the quadruple play with integrated services such as Wi-Fi coverage at home. for some companies. Third.2. unified messaging and home surveillance through a mobile device. MVNOs are an opportunity to boost core businesses by stimulating brand loyalty and enabling cross-marketing for other products and services. Second. MVNOs’ utilization of non-traditional retail channels may contribute to attractive subscriber economics. if the MVNO partnership lets it acquire more net customers (after cannibalization) than it would have captured independently. MVNOs provide operators with a means to directly reach out to specific segments (e. As seen in Figure 1 (page 4). Finally. an MVNO that combines a clear target segment and focused offer with a unique value proposition can yield attractive subscriber economics. MVNOs may also provide MNOs with access to potential customers via non-traditional channels such as cable operators and alternative retail stores. Such segments do not receive much direct attention from MNOs’ typically mass-market product development. MVNOs can usually do a better job than MNOs in stimulating usage of mobile data because they can offer focused mobile data content and applications to target customer segments. First. marketing and distribution strategies. in some cases the wholesale and retail subscriber lifetime values of segmented offers are not very different from each other. wireless continues to be a very strong growth business. university students) with a unique and targeted value proposition. the MNO runs a good chance of doing better with wholesale in the long-run. services tailored to niche segments may hold the key to the still-elusive goal of making mobile data more “sticky” with consumers.First.g. benefits to core businesses. teenagers. While retail generally guarantees a superior lifetime value. Finally.23 The MVNO Perspective New growth opportunities. Second.

Wholesale Value and MVNO Value for Different Customer Segments Sample HNO Evaluation Criteria for potential MVNOs: o Large own customer base o Strong distribution network o Strong market position o Low tariff intentions o Niche market segment o Economic strength o Mobile competence o International reciprocity o Georgaphic submarkets o Intial Public offering MVNO Page 63 of 110 .Example from the US MNO Retail vs.

2.24 MVNOs rationales There are 4 rationales for the launch of an MVNO offer 4.4.2.25 MVNOs positioning Different range of MVNO’s exist from the light offer provider to the full MVNO: MVNO Page 64 of 110 .

The enhanced service provider model is the most prevalent in Europe because it allows focusing on the product offering and the client relationship: Four main differentiation strategies have generally been adopted by European MVNOs: MVNO Page 65 of 110 .

MVNOs seldom lower their prices by more than 10 to 15% compared to MNOs. although some markets have fallen into aggressive price wars.Most MVNO communicate on low prices and value for money: .Communication examples (2004) . MVNO Page 66 of 110 .Price/ minute comparison (2004) .

Evolution prepaid prices from the introduction of MVNOs Mobile operators' key challenges (Source: OECD. Loyalty schemes: targeted promotions and loyalty programmes are playing an important role in managing churn and also in migrating users from prepay to contract. In addition. MVNO Page 67 of 110 . 2008) In this very competitive market environment. Quality of service: QOS is playing an important role in customer retention. Network coverage: expanding high-speed network coverage nationwide can accelerate the adoption of mobile broadband and other high-speed data services. consolidation in Western Europe is another topic that can also be expected to have an impact on revenue growth. Considering the level of maturity in the region. some operators have set up shared network ownership arrangements to reduce their cost structure. Wireless Intelligence. data usage is showing strong organic growth and also acts as a key differentiator amongst operators. main operator groups can stimulate revenues by leveraging international economies of scale and synergies with their operations in other markets. including emerging markets. Rationalising the portfolio of voice and data services with such price competition has led to widespread large bundled deals. fixed-mobile substitution and innovative tariffs such as flat rates. MVNOs: maintaining market share through market segmentation where MNVO development is key. operators are facing many challenges that can have a direct impact on profitability. In highly penetrated markets. Amongst the key competitive factors that can stimulate revenues are: • • • • • • Prices: changing price elasticity can provide the right balance between volumes (voice and data) and price erosion as sudden price drops can lead to a drop in revenue. mobile advertising services and PC to mobile convergence can lead to fast adoption of VAS that will stimulate non-voice revenues. Value Added Services: as voice revenues remain under pressure. Partnerships with content providers.

4.26 Key challenges faced by MVNOs .MVNO must display a light cost structure to deal with operators price per minutes MVNO Page 68 of 110 .2.

MVNO Page 69 of 110 .

5.4 MVNO market structure MVNO Page 70 of 110 .3 MVNO market drivers • • • • Segmentation Regulations Competitive intensity Heavy 3G investments 5. The MARKET structure & opportunities 5.

the Full MVNO operating model offers compelling advantages. With full ownership of the customer. and close control over the service. regardless of the underlying service offering.7 Aggregation business model benefits MVNO Page 71 of 110 . a Full MVNO offers the greatest flexibility in going-to-market and then sustaining long term growth.5. 5. While many businesses will be served well by implementing Reseller and Service Operators MVNO models.6 MVNE value 5. the ability to terminate calls.5 Market size Ovum estimated in 2005 that by 2009 around 10% of all mobile subscribers could be served by an MVNO. with compound annual growth rates of between 8% and 20%.

9 Competition is intensifying –mobile premiums decrease MVNO Page 72 of 110 .8 Key Requirements Deep understanding of the of MVNO market and MNOs concerns and strategy to gain trust Value added services delivering capability SIM Cards Voice mails Convergent services Mediation Billing (postpaid + Prepaid) + CRM Account management and marketing support capabilities Small MVNOs not always easy o deal with Small MVNOs need marketing supports 5.5.

MVNO Page 73 of 110 .

5.11 Operators need to adjust MVNO Page 74 of 110 .10 Local scale is key to achieving EBITDA margin ambitions 5.

These are distinct from domestic MVNO agreements and are intended to provide transparency of international tariffs Looking at the Market Strategies from a different view. we have the following: Three possible models Low cost garage provider Co-branding with well-known product in any line of business (i. planes etc. or roaming Mobile Virtual Network Operators (rMVNO). Clothes.) Economies of scale – born global strategy: • Multiple countries • High end technical solution • Best quality product from day one What is the company’s risk profile? Low risk: Low cost provider (low investment) MVNO Page 75 of 110 . Ay Yildiz in Holland or CIAO in Greece One specific sector of MVNO operations focuses on international. Community MVNOs like Turkuaz-Mobile in Germany.5.e. Lifestyle MVNOs: like Helio focus on specific niche market demographics. text and content to their subscribers.13 Marketing strategies Discount or Low-Cost MVNOs: provide cut-price call rates to market segments.12 The challenger strategy must be tailored to the market environment 5. cars. Advertising-funded MVNOs like Blyk or MOSH Mobile build revenues from advertising to give a set amount of free voice.

Medium low: Average IT solution without co-branding Medium high: Average IT solution with co-branding High: Born Global without co-branding WEB self-service is the Key Using 100% self service platform integrated with the operator Has all MVNO needed functions and processes for GSM User friendly Standard platform that is further developed 5.14 Timing The market for online is a slow moving thing Crossing the chasm paradigm Innovators and early adaptors Belgium is only just starting Regulation is in place Customers are getting used to online No or low churn PRICE is important and then easy to use and simplicity Offline distribution cases show that the majority sticks to what is familiar DK shows that it will change over time MVNO Page 76 of 110 .

16 MVNO Services For now MVNO services have been limited. but analysts from EMC Research have predicted that as wireless services grow. in the future a cell phone user may be able to subscribe to a network operator plus multiple MVNOs for specific data services over the same phone. another weather and traffic and still another could provide instant messaging capabilities.5. For instance.15 Provider Selection criteria 5. MVNO Page 77 of 110 . so will the availability of niche MVNO applications. One MVNO could provide sports news.

"International Calls &roaming" MVNOs Ethnic MVNO propositions According to research of Piran Partners.Internet Based Virtual Operators . high quality mobile phone customers. much needed in a market so characterised by churn. more and more MVNO's develop propositions focussing on this segment. this market segment is represented by Lebara. Therefore. In Holland. Chippie.Virtual Operators . European Ethnic Migrant Population (There are 32 Million people in Diaspora in Europe) Reference: Lycatel Mobile MVNO Page 78 of 110 . Piran Partners has compared these propositions to other MVNO propositions and reveals that these MVNOs are on average more profitable and deliver quicker results.In this way. each MVNO and the network operator could focus on their own niche markets and form customized detailed services that would expand their customer reach and brand.MVNE based MVNOs . Voice Messaging Data Calls Voice Mail International Calls Billing Refills/credit Usually free or next to nothing for on net/ flat rate off-net nationally Very cheap on-net/ Follow the competition for off-net Cheaper than MNOs Cheaper than MNOs Cheaper to certain targeted destinations National Calls: Per second International Calls and Roaming: per minute Availability of a variety of refill cards is a must Provider Types in Europe The types of providers in Europe can be: . Ethnic minorities represent a source of new. IDT. Ortel and Ay Yildiz. Lyca.

some times referred to as Machine-to-Machine or “M2M” MVNO’s facilitate communications between various machines with the help of a wireless network. branding. MVNO Page 79 of 110 . Sonopia claims that customers can set up a new mobile service in roughly 15 minutes.Companies to allow MVNO set up (by Sonopia) Sonopia. and Web sites for their new subscribers. a US based MVNO. and more. Applications supported by M2M MVNO’s are many and varied including telemetry. monitoring. In a world of expanded M2M communications. It is almost universally agreed that successful MVNO’s will have some combination of scale. Sonopia will rent network space from Verizon Wireless and give the client companies mobile phones. DATA MVNOs. we believe that Data MVNO’s will evolve from a successful niche business into a booming opportunity for vendors and service providers alike. billing. allows companies a white-label concept whereby companies can launch their own-branded mobile phone service. and or a particular important niche. remote asset management.

1 Setting-up Strategies Three strategies exist to setting up an MVNO: . and developing and executing the launch plan. as well. the content services may not even be owned by the media company that starts the MVNO.g. particularly from the more aggressive media organizations (e. a media MVNO can avoid price competition and gain significant customer loyalty without the need for extensive marketing of the products. Finally. etc) can be consumed on a mobile device but there could also be other telecom services such as fixed-line calls or Internet access. music. Also most of the bundling experiments in telecom world have been realized for media companies destined primarily for wired/fixed Internet communication channels (e. bundling is probably the most attractive to many businesses. even with a strong business case.Bundle together premium content or other services Of the three strategies mentioned above. There is a feeling among many media companies that the large revenue percentage taken by MNOs is unjustified. Some of these companies would like to move up their value chain by creating their own web portals and a few are now being set up by their own MVNOs. By bundling media content together with voice and data traffic. the market segment for any of the options of strategy has to be selected very carefully. The last strategy above for setting up a successful MVNO is the one that bundles together mobile with other services. ADSL) while most mobile operators sell content over their networks over the last years. They have however viewed cautiously by many operators that see potential competition with a strong brand-based offering. 6.g.Establish a price-winning formula .2 Key Issues MVNO players are faced with • • • • • Is the MVNO market sustainable? Is FMC a long-term driver of the MVNO business . MVNO BUSINESS SETUP The process starts with developing a strong business case and negotiating a viable wholesale agreement.g. A very feasible MVNO can fail due to an undifferentiated market entry strategy or poor launch execution. However.will FMC players develop or acquire their own cellular infrastructure and what are the pros and cons of the respective approaches within the MVNO environment? Where are the next potential growth markets for MVNO growth? What are the most developed MVNO markets and which will be in the future? What MVNO approaches are sustainable long-term? Page 80 of 110 MVNO . however the bundling option seems to present significant importance. Rupert Murdoch’s empire). 6. a potential MVNO (which usually lacks mobile expertise) has a major challenge in designing the right entry strategy. photos.Build on a well known brand . It is always dependent on the type of implementation. video. but it is also the most risky as it has yet to be proven on a large scale.6. Typically these services (e. In some cases.

3G only. reasoned hard facts free from industry hype Provide clients with clear business intelligence to support recommendations and investment Page 81 of 110 MVNO . business service providers. niche. retailers. business. analysts and venture capitalists • • Provides unbiased. community orientated and many more Device and component manufacturers • • • Understand the MVNO business proposition from the service provider perspective Identify key players and scope for partnerships Recognise evolving roles and opportunities in the MVNO service provisioning value chain Vendors • • • Understand the MVNE value proposition and platform/software providers role within it Identify opportunities for service provisioning and support Formulate service provisioning strategies for clients based on best-case approaches Consultants. including discount. brand owners.• • • • • • • • • How does an MVNO go about successfully launching in this evolving and challenging market? What type of approach is most likely to succeed and what are the strategies to ensure their success? Is the MVNO market sustainable? Is FMC a long-term driver of the MVNO business .3 Issues per player Operators • • • Evaluate and quantify opportunities in various strategic roles from service provider and partner to competitor Identify threats and ramifications of current market developments and understand their wider strategic impact Anticipate market as it moves forward and formulate strategies to tackle it Potential MVNOs • • • • Evaluate the opportunities and challenges Analyse potential strategic approaches to implementation Assess business models of specific industries including.will FMC players develop or acquire their own cellular infrastructure and what are the pros and cons of the respective approaches within the MVNO environment? Where are the next potential growth markets for MVNO growth? What are the most developed MVNO markets and which will be in the future? What MVNO approaches are sustainable long-term? How does an MVNO go about successfully launching in this evolving and challenging market? What type of approach is most likely to succeed and what are the strategies to ensure their success? 6. content providers and many more Evaluate specific business approaches.

CPGA. This is not an easy transition. functionality and quality will be more important for the MVNO than any mobile technology. CCPU. determination whether MVNEs will strengthen the MVNO service and increase their profit (could be based on external analysis). Financial institutions: Need to assess the viability of MVNOs and MVNEs to support a decision on whether to finance MVNOs and MVNEs. specific expertise). The MVNO profitability calculations (NPV. is needed. quantify the long-term equipment and service opportunity in the MVNO space based on revenue. and ARPU) will help financial institutions to benchmark such data against existing cases. The mobile market is changing from an environment dominated by voice to one where mobile data services are equally as important. and if there is an opportunity beyond application hosting. Finally. The MVNO profitability calculations will help benchmarking the MNO performance against MVNOs. This is worth bearing in mind. 6. accompanied by a re-organization of the value chain. MVNO Page 82 of 110 . MVNEs: Need to understand the long-term market potential and MVNO perception of MVNEs. Also determine if MVNEs are competitors or complementary. It also demands cross-industry partnerships and new business models.5 Business Case Structure The traditional values of brand. will help. as it requires adaptation to new services concepts and new technologies. Finally. Also determination of an optimal strategy to attract MVNOs (end-to-end solutions vs. Finally assessing of key competitors and benchmarking of the MVNE positioning against them.6. Also benchmarking of costs and profitability against industry averages and other key players is definitely required. since the benefits of mobile data services may vary greatly by applications area and segment. MVNOs: Need to develop a strategy using external help (a consulting firm) with objective long-term analysis of the MVNO market.4 Targets per player Mobile operators: To quantify the long-term revenue potential of the wholesale market to support decisions whether or not to work with MVNOs and MVNEs. Vendors: Must assess the MVNE opportunity for a long-term strategic entry (partnerships or acquisitions). profitability. and subscriber forecasts.

As seen in the figure below. 6. which increase in number and complexity as one moves up the different steps of the wireless service delivery chain.7 The MVNO Business: High Entry Barriers and Risks Despite the attractiveness of wireless. including custom mobile content and user interfaces.7. possesses entry barriers and launch risks that are high enough to discourage most outsiders from making the plunge alone. The wireless business. though potentially lucrative. MVNOs must manage a wide array of responsibilities and relationships. Prospective MVNOs often have little MVNO Page 83 of 110 . economies of scale and high peak funding are among the major barriers to entry faced by potential MVNOs. Design of an offer. Each of these steps is linked with potential obstacles and partnership dependencies that could derail an MVNO’s launch plans.6.6 MVNO Business Guide Few key questions for the business case include: What are the effects or different pricing schemes? Which mobile data services take more capacity? What are the effects of revenues share arrangements? Which mobile data services have the highest contribution? How mobile data services and price plans complement each other? How mobile data services and price plans capture from each other? MVNOs who can proactively address thre questions and manage their revenues and investments in key functional areas will be successful in this competitive market place. from network leasing to channel development. 6. and the selection of handsets. an MVNO requires a network leasing agreement with one or more MNOs. They will also maximize their return on investment and share holder value. follow. The final steps are brand and channel development.1 Barriers Lack of wireless skills and expertise. and the selection and integration of mobile data platforms. setting up an MVNO is a daunting task. Next steps include the selection and integration of back-office systems and processes.

6. and post-launch subscriber acquisition costs range from € 65 for a low-end pre-paid offer to over €360 for a high-end post-paid service (based on MNOs current CAC –Customer Acquisition Cost).2 Launch Risks Potential MVNOs also face a number of launch risks. as well as content providers and handset OEMs to profitably deliver a differentiated value proposition to their target segments. Once in the business. If the MVNO can demonstrate strategic value to the MNO partner. most MVNOs will face a few years in the red before they can break even. These costs can delay an MVNO’s EBITDA breakeven and require considerable investment (in the range of millions) in peak funding. Even MVNOs that successfully combine internal resources and partnerships to navigate these challenges and risks will still be disadvantaged to existing players due to economies of scale.7. and the negotiation of partnership terms and conditions. the MVNO can extract a more favorable deal that is not just based on volume of subscribers. MVNOs need to partner with individual backoffice systems/process providers. and risks related to the execution of the launch. including risks associated with the selection of partners. The first class of risks belongs to the selection of the appropriate partners. MVNOs need scale to negotiate favourable pricing terms on network leases with MNOs and handset contracts with OEMs. MVNOs must identify and form relationships with the relevant distribution partners MVNO Page 84 of 110 . Launch can be preceded by six to nine months of start-up costs. In addition. An MVNO’s long-term prospects depend largely on whether the selected MNO places strategic and not only financial value in the MVNO’s target segments and proposed offer. Finally.relevant experience to guide them through the different steps of the wireless service delivery chain. MVNEs and mobile data platform providers.

keep track of and monitor progress and risks of hundreds of interdependent milestones cross each level of the wireless service delivery chain. as well as brands evaluating the MVNO model. MVNO Page 85 of 110 . experience and systems are of little good unless the MVNE has worked out how to share risks and responsibilities with its MVNO client and the other third parties involved. quite often requiring the support of an MVNE. Execution of launch opens the field for a second class of risks. Indeed the very best MVNEs are those that have given their MVNO clients the opportunity to fine tune their service portfolio and be most responsive to changing market conditions or new technologies. Specialist skills.8 The future of MVNOs MVNEs are increasingly relieving the pressure that MVNOs continue to experience as they seek to enter markets quickly and effectively. NextGeneration MVNOs have certainly got the potential to cause even more excitement than they already do. The criteria for success in this MVNE field obviously must include assured capabilities in running a network service business. MVNOs managing their launch programs have to execute. This already includes network providers and the branded service businesses that have a direct relationship with a customer. An open relationship with clean demarcations is critical. Managed carefully and integrated successfully. 6.in order to cost-effectively reach their target segments. coordinate. however close collaboration between all players is absolutely essential to success. MVNOs that fail to exhibit a strong execution and program management discipline in the launch phase could end up suffering from long delays or developing a value proposition that is not differentiated enough to attract customers in their target segments. Outsourcing the complex business of billing and customer care for converged services to an MVNE creates real flexibility for the MVNO. Naturally. the role of the MVNE will grow. there is a rush of businesses positioning themselves as MVNEs. As these proliferate and seek competitive advantage. MVNEs are becoming an integral part of a maturing converged communications industry.

The low-cost MVNO does not offer the host operator any value. this brings us on to the most important fact of understanding wholesale and the MVNO. with an MVNO you need a small group of people who understand the whole process and service. which represents more than 500 GSM operators and key mobile vendors around the world. and the host MNO cannot support the MVNO delegating this to its staff. second and third line support on behalf of the manufacturer. as the MVNO model cannot support delegation to masses of employees. A follow-on to the buzz-word "Brand MVNO" loved by those who aimlessly follow trends from the back-seat. and to completely underestimate the complexity. not a network. Those who fall quickest into this trap are existing fixed or other operators. and should never be driven by the network. is cautious about regulation surrounding the MVNO model. specifically to provide input on whether government intervention is necessary to allow MVNOs to offer services and applications at a lower price to consumers.6. in that and MNO or MVNO owns and/or manages the very complex and expensive customer equipment (handset and SIM). an MNO can cut prices or launch a budget service whenever it likes. Finally. but also the first. This is obviously a finite market and one which could fin itself in serious problems if and when the operators engage in a price war. To successfully pull of an MVNO you need to keep costs to a minimum. passwords and the process of the user being able to use anyone else's wireless modem router in the same way as they do at their own home or office. the GSM Association. as well as the authentication. not all. Mvno and the regulator So far MVNOs have not been regulated in any country. The whole point of wholesale is the resale of excess capacity. Selling on cost also only acquires a customer with cost as the only value. and the MVNO requires a very different skill set than managing a fixed network. The only way a low-cost MVNO can offer value to an MNO is if the MVNO takes customers that are so low value that only the MVNO running a much leaner business model could make money from them. they are his lawful prey. It is keen to see legislation that helps companies provide and take advantage of the financial potential of MVNOs. where you are only generally responsible for part of the end-user process. Mobile is never to be underestimated. some UMTS MVNO Page 86 of 110 . The ITU has received several requests to study the issue. This would help to ensure a more efficient use of the spectrum but some incumbent providers argue that the market is already competitive and intervention is not necessary. Wholesale mobile is vastly more complex than wholesale DSL. and as Ruskin said. to create extra capacity is to completely misunderstand the underlying concepts of Virtual and Wholesale model. It is also far different from running an MNO. now seems to be the "low-cost MVNO". Mobile and therefore MVNO is vastly different from other wholesale and even other telecoms models.9 Implementing an MVNO Understanding the MVNO The MVNO is a business. For instance. but it is equally keen that network operators should not be legally required to open their networks to anyone wanting access. At the same time. There are arguments from both sides as to whether the MVNO model will bring otherwise unreachable revenue or unwelcome competition to the MNOs. expense and overheads required of running a mobile network. fixed or other telecoms models running an MVNO is also vastly different from running an MNO. which means having staff that understand the whole end-to-end process of delivering a mobile service and a call. the model should bring value to both parties and be mutually profitable. which paves the way for someone else prepared to offer an even worse service even cheaper. in the DSL world this would be the equivalent of the DSL provider not only providing a DSL line and a wireless modem/router.

The universally held view on regulation of the MVNO is that it should be defined by commercial agreements and not regulatory intervention. gateways. it is still essentially or potentially even a competitor with it. and most certainly a competitor of the other MNOs it did not reach a commercial agreement with. beyond reaching commercial agreements with a host operator in each member state. Additionally there is the issue in the EC of an MVNO in one member state.International gateway. Such regulation only focuses on prices and carriers.24 x 7 monitoring helps ensure reliability .Secure routers. encourage innovation of new services. it will slow innovation and decrease the health and longevity of the mobile market. based on the latest technology . and all mobile telephony players..Several carriers interconnects (to choose from) . carriers accept MVNOs but restrict that agreement to Reseller MVNOs. It goes without saying that the MVNO requires regulatory assistance and support from these MNOs and indeed even other MVNOs. on the other it has also been an excuse for some regulators to wipe their hands of the MVNO and any regulatory issues it may have. It is obligatory to consider the processes affecting pricing. benefiting subscriber productivity and increasing the health of the industry. not the full MVNO model Full MVNOs have the ability to create services and innovate because they own certain core network nodes such as the GMSC and HLR. practical barriers to this that need addressing and regulatory support. In the long term. in the short term.Low costs guaranteed through global carrier agreements Thus international calls should be switched to international destinations via the optimal route Core Network Elements The core network should typically be made up of the following components: . as whilst the MVNO may reach a mutually beneficial commercial agreement with one MNO. like any other business within one EC member state.. however. are fighting the regulatory authorities for the right to share their spectrum. These services include: advanced roaming solutions that will drive roaming costs down The Full MVNO can establish its own roaming agreements and this enhancement will be translated to consumers Global MVNOs can even leverage their footprint and create multiple MVNO agreements in multiple countries - Effect on Consumers and the Way Forward: Regulation on international roaming tariffs will. this strategy will benefit all consumers and players in the market. Regulation for opening the market to competition through full infrastructure MVNOs will definitively reduce roaming and long distance tariffs and.licence-holders. push prices down. particularly in Germany. the MVNO market is still closed in several European countries In other countries. there are still large. Traffic Management International traffic should be managed to ensure that customers get the best possible combination of quality and service: . having the right to freely move goods and services and even set-up in other EC Member States. Whilst this is wise on the one hand. This is very unwise. this MVNO will almost certainly have shared important commercial and strategic information with these competing MNOs before reaching an agreement with its chosen host MNO. service innovation. at the same time. To boot. tunnels & IP networks .Intelligent networking ensuring reliability & quality MVNO Page 87 of 110 .High quality connections maintained by the routing and switching teams (own or the MNO’s) .

Always be empathetic to the needs of diverse communities MVNO Page 88 of 110 . This model allows the same phone but a different service to be provided on the same infrastructure. machine to machine (M2M) and even the vertical telecoms data and voice MVNOs that will shape the market in coming years. Mvno and IMS IMS allows an MVNO or even MVNE to provide multiple. this concept was heavily promoted both by Mobile Network Operators of the reluctant variety. for example.Give customers the convenience of direct-dial international mobile calling . differentiated services on the same platform and even the same phone. It is very important for customers to stay in touch & that’s why brand values such as those listed are important in everything an MVNO does: . with Java SIMS and Java toolkits being much more suitable and flexible for the MVNO and even cards with embedded flash memory on the horizon. and most importantly allows customers to move between these differentiated services. Regarding Services. Some of these include Telematics. things are changing with more competition. Mvno and FMC Fixed-mobile convergence opens up the MVNO market to the numerous potential MVNO models that emerged previously but never reached their potential. should mean more to customers than just making calls. This is not necessarily wise. mainly as the market is no longer dominated to such an extent by those manufacturers who also had a core business in mobile operator infrastructure and maintenance. The SIM buying model of the host MNO is often dictated by different parameters like and driven by issues such as volume and even the fluctuating and expensive nature of silicon at the time most MNOs set-up. This can all be done remotely with IMS or even SIM applications. This is an often overlooked element of the MVNO that the MVNO will often try to neglect in preference to just taking the MNO SIM and rebranding it. This would allow. maybe in order to discourage the evolution of the MVNO. The handset is becoming less and less the huge thorn in the side that it used to be. more open operating systems.- 24x7 Network Operations Centre Mvno and the SIM The SIM is the single most important part of the ownership of the customer.Make products easy-to-use & prices easy to understand . a school or university phone to also form the basis of another MVNO targeting the "parent phone" or be passed on to become the "parent" phone or even follow the customer to become a "work" or "lifestyle" phone. as there are many ways to differentiate a service via the SIM. Apart from not being true.Always give customers value for money .Make sure all relationships are built on trust . and the obvious conflicts that arise form the situations that mobile operators form 99+% of these companies' business.Ensure all connections are of great quality . However. Since then the market has moved on. MVNO and the brand A commonly held misconception of the MVNO is that it was all about the brand. more intelligent handsets and finally the rise of ODM and OEM handsets that will soon mean an MVNO can potentially design and launch its own handset from a reference design. MVNO and the handset The handset and the SIM are the key to the success of mobile and are therefore key to the success of the MVNO.

its implementation is expensive (300K €) MVNO Page 89 of 110 . such as: • CDRs available more frequently • Possibility to shut down a line on a 24x7 basis • Fraud Management System tailored to the MVNOs needs • Fraud Management reports Regarding Roaming fraud (case where MVNO core business is offering the roaming service). credit checking may not be strong enough The above reasons may in turn bring about certain Implications for both the MVNO as well as for the host operator: The subscribers are indirectly MNO subscribers Less revenue for the MVNO means less revenue for the MNO also Depending on the collaboration agreement. while the expected revenues most of the times are limited In the case of the MVNO being engaged in post-paid market. a number of actions can be taken to counter this problem. the implementation of the NRTRDE solution.MVNO fraud exposure MVNOs are more vulnerable than an MNO towards fraud since: Due to limited head count (at least initially for cost-cutting reasons). dispute handling sometimes may be unclear. via which: • Send NRTRDE files to MVNOs (IMSI splitting feature) • IMSI provisioning • File Splitting and naming of new files created • Distribution of file to respective Service Provider • Reporting on splitting activity • Fraud Management System tailored to the MVNOs needs • Suspicious Dialed Digits (SDD) • Pattern Matching • Suspect Equipment • High Usage • Premium Rate Service • Mobile Data Evaluation Note: However NRTRDE is mandatory for MNOs. there are few or no people dedicated to fraud and revenue assurance The MVNO may try risky business cases/ scenarios. with the risk of MNO losing the MVNO Solutions and recommendations (For Fraud) Regarding domestic fraud. again for economical reasons.

both MVNO and HNO side.10 Modeling MVNOs: The Big Picture Areas to be dealt with are: Contract management Following issues are to be covered in the contract management phase: Numbers. site set-up. location and interfaces Billing. e. Sales and technical support Sales Outlets. Invoicing. Reporting issues Software programs and their administration MVNO service package (basic / options) MVNO activation / set-up project All relevant items in the contract to be executed. own number space or part of MNO space SIM card production / logistics. Systems. Customer Care / CRM MVNO life-cycle management Changes and modifications in MVNO portfolio Agreement updates / extensions / phase-out MVNO deregistration / transfer of customer base MVNO Page 90 of 110 . how to be arranged Network Infrastructure.6. SIM card logistics Support. deployment.g.

For postpaid propositions. it should be send in regular paper format or by e-mail. using several threaded parallel bill cycles. vew/download invoices. After a bill is generated. is enabled to perform their own customer care services (outsourcing of these services is always a possibility). the subscriber bundles and the discount models. Rating is based on the rate plan. Such features may include: • • • • • • • ticketing & progress management. If all CDRs pass the exception rules. Billing After rating an invoice can be generated. In this bill run the final rating of CDRs must be performed. Mediation. detailed customer information including CDRs. sales management & order tracking. First. a credit check must be integrated into the activation process. Page 91 of 110 MVNO . finance management. Rating & Billing Mediation: is performed to create a general CDR format from different formats (for instance fixed and mobile). task management. Rating: is performed in different steps. rating & billing is an important process. SIMs can be activated realtime or through customer care.Provisioning The provisioning module is one of the key areas that enables activation of users on the network and management of network settings. Such a function is usually easily integrated with existing websites and could offer services such as the following: • • • • • change personal details / moving. as they enable MVNOs to make modifications to rate plans within short timelines. Using such features the MVNO Customer Care environment. So provisioning arranges the link between the telephone number to a SIM (IMSI) and the activation of this combination on the network (IN/HLR). Provisioning should allow users to change certain important service settings. upgrade/change contract. every CDR is pre-rated (to enable fraud detection). request/track status of number porting. enabling flexible propositions to the market. Mediation. Self Care The Self Care function (automated customer service) may decrease the amount of calls on the customer care department. should be easily integrated in existing call center environments. Customer Care Customer care features. customer automated e-mail interaction. request/track status of SIM swap. case & queue management. they should be stored as non-rated and formatted until a bill-run is performed.

In this way. Additionally. The role of Business Support Systems in a service provider is to cover four main areas: o Product Management o Customer Management o Revenue Management E-Commerce An e-commerce functionality that is fully integrated with online payments and distribution & logistics should be sought. customers or customer care agents are always able to obtain real-time status information about orders. the possibility of offering SMS alerting or sending paper reminders may be adopted. The possibility to fully integrate the distribution of products in the BSS* environment should be investigated. download settings through OTA. Business Support System (BSS) A Business Support System (BSS) is a platform that a telephone operator. which could be paid using Credit card payments. Revenue Assurance Revenue assurance takes place on the field of collections. customer care and can be seamlessly integrated with existing websites. BSS and OSS (operational support systems) platforms are linked in the need to support various end to end services. Collections Can be obtained through standard interfaces to third parties who can offer collections services. The shop can thus be integrated with distribution. Pay-Pal. Direct Debit. When usage amounts of postpaid customers exceed a specific level. Vouchering MVNO Page 92 of 110 . etc. Additionally via interfaces: to the OSS system that can trigger events (for instance e-mail) or to BSS reps in case of a fraud event. but also service products (for instance a paper bill). Fraud Detection The basic fraud detection has to do with high usage. Products like SIMs. MVNE or ISP uses to run its business operations. self care. Each area has its own data and service responsibilities. A credit check can be integrated into the payment process if necessary. MVNO. Distribution & logistics Connectivity providers often are concerned with distribution / logistics operations when products are sold through customer care or online sales. the system should inform certain users of the system. handsets etc need to be transferred from the warehouse to the end-customer and in some cases needs to be installed on-site (fixed). In the online shop not only physical products should be offered. e-commerce and fraud detection.• • change services.

Excel. Postpaid. Dealer Support The dealer support enables the connectivity provider to: • • • manage dealers. In configuration management (as a part of system management). perform credit checks place bulk orders System Management System management should provide information about running tasks. It should be possible to outsource the number porting process to third parties. hybrid or flat fee). Time to market The actual implementation duration depends on: • • • number of interfaces proposition (prepaid. A typical implementation could become operational within a timeframe of 3-5 months. additional user-specific reports should also be possible to be generated. creating an overview of all number porting requests & status and the possibility to modify these. actions. fixed and VOIP suppliers. PDF or Word). Number Porting The number porting is specifically required for MVNO's. loggings etc. Using porting. users. MVNO Page 93 of 110 . manage volume discounts and bulk ordering levels per dealer. The possibility to import voucher batches from a third party and distribute these to dealers and agents should be available. provided there are standard interfaces to existing parties which offer these services. perform order approval for dealer orders. Availability of third parties and MVNO. creating the possibility to analyse the data. CSV. interfaces etc. Reporting Reporting must offer real-time standard reports. Dealers can use the dealer module to: • • • sell products and perform in store activation of products and contracts. settings should be changed for prices. imports. which can be exported to various formats (HTML.Vouchers are relevant for prepaid propositions or specific marketing events (discount codes). services. On request. the connectivity provider can manage the porting process.

Pricing (When buying a ready solution – from an MVNE) Pricing is usually based upon three components: license fee. today MVNOs are not differentiating much from each other by (new) value added services.functional maintenance (during office hours or 24x7).setup & implementation. To become an MVNO. .Owning a strong brand or focusing on niche markets .Having efficient distribution channels . and a sales channel.11 Critical Success Factors Generic • • • • • Identify latent opportunities Create innovative services Flexibility to provide customer-centric solutions Spread awareness of enterprise mobile messaging Ease of use 1st generation MVNO Despite their success so far. 6. • Minimum time to market and a flexible operation MNO access especially the ”new” countries: Page 94 of 110 MVNO . .technical maintenance (again during office hours or 24x7). implementation fee and support & maintenance. . depending on modules purchased.license fee. a customer base. is the cost significant lower than postpaid.license fee (a percentage of the initial fee . .Enjoying marketing skills . one should cobble together a partnership that consists of a connectivity of a regular telco. Maintenance fee is usually based on the number of subscribers in the base. this has been based on all or most of the following: .setup & implementation infrastructure (in case of own environment) Yearly costs . For those that have enjoyed success for far.could be around 15%). they need unique and compelling data services. One time fee . Most important.Proposing innovative content Operational requirements to develop an effective MVNO business • Critical points for a successful launch – Back office what can and should the MVNO do and what can MNO and MVNE handle – Evaluating the cost of providing and managing the various aspects of back office operations and infrastructure – How can MVNO be smarter then MNO when it comes to cost and flexibility – Is prepaid THE optimum solution for an MVNO.

this have a serious impact on your choise of modell Focus on simple robust start up products Keep the number of interfaces to a minimimum to start with • Back office what can and should MVNO do and what can MNO and MVNE handle o Actual possibilities? Legal MNO Competence o Business case? MNO – trafic margin Cost for the different scenarious Be aware of all the ”extra” cost from the MNO o Can you find a flexible solution? Enabler Outsourcing partner As little as possible at least from day 1 Only tasks that is business critical for your overall mission Only tasks that make financial sense from day 1 • How can MVNO be smarter than MNO when it comes to cost o o o Evaluate what you must own and what you can rent .- o Time.go on “pay as you go” to keep your operational options open and your fixed opex and capex costs to a minimum Keep your dependencies to complex system at a minimum You do not need to control everything – but be in control • Is prepaid THE optimum solution for an MVNO? Is the cost significant lower then postpaid? o Prepaid upsides: – Better Cash flow – “No” bad debt – Pre-provisioned – No or lower billing cost – Transaction cost low – Often first service deployed for MVNO from MNO o Prepaid downsides – Worth of customer database lower – Churn higher – Residebntial ”only” – Channel cost high – Arpu lower (30-50%) – Services available • Roaming • GPRS • MMS • Content Page 95 of 110 MVNO . services and set up is not always free of choice Timeline: What is YOUR deadline.

A new business model in the wireless industry is emerging in which consumer spending on telecommunications and entertainment will merge. it can power a strong value-creating business. There will be casualties. Such decisions. then expand. it becomes difficult to move these subscribers. emerging broadband wireless technologies and compelling economics. The same is true fro back end support structures (customer care. Each carrier will be strong in some categories and weak in others. network quality. but a painful exercise. supported by a business case built on assumptions and based on deep wireless expertise. wholesale price and MVNO operational-support capabilities. While individual performance will vary. but virtual operators and network carriers have the best chance of survival. concerns are growing about the dangers of excess competition and price commoditization. to some degree. Once an MVNO has partnered with a network operator and acquires a certain number of customers. MVNO Page 96 of 110 .12 Closing remarks New players are making their move: MVNOs are entering the wireless market because of its revenue potential. MVNOs will have the dual benefit of making the market more efficient on the cost side and turbo charging the adoption of services on the revenue side. With the increasing number of MVNOs. higher churn and less “Value” Postpaid is an option you shall consider from the business case side especially if you already have postpaid/Direct debit customers 6. thereby locking the MVNO customer to the network. economic flows and culture of the wireless industry for years to come. These worries are unfounded.• • • • • No it is not the optimum solution but it is quick. billing) where expertise is widely available. to help determine the course of action to be taken. MVNOs will change the structure. releases cash With your own IN you can keep quite flexible products Roaming is coming The cost will be lower but probably lower ARPU. new MVNOs will need to craft an engaging value proposition for their target customers. to create a much larger and more profitable market. this contract can become the weal link in the MVNO model. while if done well. Aside from the carrier selection and deal negotiation. with a decision based on variables such as network protocol. Separating from the carrier is not impossible. This highlights the importance of crafting a solid MVNO contract that includes margin protection to reduce business risk for the MVNO. determine the risk-reward profile of the venture. Carrier choice will vary by MVNO. The key here is the decision to either do-it-yourself or leverage through a third-party. If not undertaken correctly. the large pool of churn customers. This expertise is readily available from outside providers. An intimate understanding of these elements is essential for MVNOs.

MVNOs should partner with an MVNE With an end-to-end solution With experience With features and functionality that add subs to drive profit MVNO Page 97 of 110 .7.1 Conclusions & Lessons to be learned To be Adopted Try to turn the market from offline to Online There is low cost setup implementation (in doing this) Have a strong technical platform with no or minimal maintenance or service failure Avoid fraud Utilize Outsourcing as it works better than in-house Partners DO contribute with their core knowledge Make sure that Supply chain is 100% solid and work with NO errors Arrange Risk sharing with MNO and/or MVNE Focus primarily on sales Make sure that Online marketing is available Approaching Communities is easy To be Avoided It is hard to get into the market (existence of strong players) Operators know how to compete o Long binding periods o Free minutes and SMS Regulation is non-existent or slow and ineffective Turning the market from offline to online is hard and takes time E-payment is not user friendly and it takes time for the user to get familiar with it The market is not as price sensitive as usually expected – even 30% lower prices is not enough Physical distribution is hard to beat online if you’re not patient o Is needed Viral marketing is misused by everybody in the Telcomarket Launching a low-cost proposition using an established brand is a key element for being prepared to the increasing level of aggressiveness and price pressure Brand compatibility makes the difference. especially when it is possible to combine best-price image with quality reputation Being the first makes also the difference Being the cheapest makes also the difference Mobile telephony offer is a good opportunity for extending a fashioned product line of a retailer MVNO or not MVNO is not the question : the best partnership must be the goal Considering a strong partnership rather than just one singular revenue sharing model opens door for other future interesting co-operations… Standard MVNOs Tips MVNOs should focus on branding and growing their business NOT the back office. Conclusions 7.

but in several cases that was fatal 7. as: There is a guaranteed income due to the monopoly or oligopoly that popped up because the 3 or 4 GSM national licenses were not awarded at the same time. The MVNO model can in fact apply to any network economy with a technological context and with assets not easily replicable. The MVNO brings a solution as it forces the mobile operators to unbundle its vertical integration and multiply the number of players. the market shares it acquires during that period create this guaranteed income typical in an oligopoly market. IMS has as an objective to create services that are irrespective of the underlying MVNO Page 98 of 110 . These new operators operating a different radio access networks will eventually become MVNO between each other. Data MVNOs Tips • Data Content MVNOs need all the same things as MNOs and other MVNOs.2 Conclusions regarding the future Referring to telecoms. However. even in a non collusive way As within most network economies. the spectrum in mobile telephony). The GSM operators are vertically integrated and so can behave independently from upstream and downstream.With on-demand scalability With the ability to deliver speed-to-market The right MVNE can deliver profitability to both the MVNO and the host operator. it is expected that the emergence of new (agile) wireless techniques will create new kinds of mobile operators not relying on GSM or UMTS. It is because telecommunications are by essence a network economy that the market is inefficient from a competition point of view. the termination and the roaming market could benefit from MVNO as a remedy. As such they are a remedy at least for the access/origination market. Also. PLUS – Distinct and unique content – Highly topical content (rapidly changing) – Depend on their MVNE • MNOs need Data Content MVNOs – Drive more traffic – Control loss to alternate networks – But MNOs are poorly positioned to serve Content MVNOs • Challenges for Content MVNOs high – Content MVNOs need MVNEs to handle the “details” – MNOs need to open networks Beware • end-users have already experienced the deregulation activities in declining prices and simplified pricing schemes • many MVNOs have entered the market to learn the business and prepare themselves for the emerging.per country . These new operators will need the GSM network to complete their coverage and so will need to become MVNO. The limited spectrum allows . if the first entrant can exploit the spectrum ahead of its competitors. the limiting factor for a fully efficient market is the owning of a rare resource not easy to replicate (the local loop in fix telephony. The MVNOs of today are customers centric. more content and data-based 3G market.only 3 or 4 operators with a radio access network.

Implement MVNOs with fixed interconnection cost and the network capacity bought virtually from nowhere − MVNOS implement the cost leader strategy − significantly lower capital (approx. VAS servers. When IMS will be standard.radio access network. integration costs) − wholesale pricing options for MNOs who decide to sell excess capacity 3.3 Three improvement suggestions 1. Give the players a possibility to act as MVNOs with different strategies − service leaders must select a service mix they intend to offer − requires for modelling financial flows based on service demands per customer group and actual costs to produce a certain service MVNO Page 99 of 110 . the network capacity is bought from actual players − network capacity is bought for a certain period of time − switching costs for a MVNO due to investments to the network infrastructure (e. 20% of MNOs costs) and operational expenditures − fixed interconnection prices determined by the game operator − restricted set of services a MVNO can offer 2. Introduce means for negotiation.g. billing and charging systems. the need to run a service on several networks will become natural and the service provider will have to become a MVNO. 7.

pyr. MVNO Page 100 of 110 .com/ http://www.com/ 9.com/ http://www. References o o o o o o o o o o o o o o o o o o o o o o o o o o Personal Interviews with Mobile Operators Higher Management Deloitte Surveys (www.uk/ http://www.gr http://www.effortel.com/ http://www.com/ http://www.tescomobile.com/ http://www.mobilein.uk http://www.com.au/ http://www.3gnewsroom.deloitte.thebesengroup.com/ http:// www.atosorigin.siia.wimax-industry.8.gsmworld.net/ www.co.uk/ http://www.transatel.takashimobile.co.mobilevirtualnetwork.mvnodirectory.com/ http://www.statistics.com www.eurocomms.co.uk http://www.co.com/ http://www.com/ www.mobilevirtualnetwork.com http://www.com http://www.analysysmason.co.atkearney.kpmg.3G.com/ http://www.ovum.com) Business plan Pro EUROSTAT http://www.uk/ http://www.

which equates to a 3. cellular revenues represent 1. In 2008. and decline in effective voice price per minute. Switzerland and Austria. Our key finding is that in most countries. In markets such as Germany. partly due to: new European roaming regulations. the top 5 operator groups (Vodafone. As market penetration continues to rise. value added services and market segmentation which includes MVNO development. Italy. and in a time of general economic slowdown.5% of Gross Domestic Product.1 billion in 2007. Telefonica O2 and TIM) generated revenues of 106. weakened ARPU. In EU15 countries. cellular revenues have decreased year on year. Total revenues in the region reached 155. Western Europe recently passed the 500 million cellular connections mark and the most highly penetrated region in the World (120% on average). loyalty policy. or 69% of the total revenues for the region. Penetration Rate MVNO Page 101 of 110 . mobile operators are turning their strategies to increasing revenue share and focusing on customer retention.32% growth from 2006.1 billion Euros in 2007. competition is getting tougher.6 billion Euros. 3. mobile revenues have been growing faster than GDP which demonstrates that the telecom sector has proven to be resilient to the general economic downturn. Most countries are now home to 3-4 mobile operators. Non-voice revenues appear to be driving growth as voice revenues remain under strong pressure. network coverage. Orange.32% growth year on year. In Western Europe. Figure 1: Western Europe Mobile Operators Total Revenues vs.Case Study – Western Europe Cellular revenues Total Revenues generated by mobile operators in Western Europe reached EUR155. we expect to see a similar relatively healthy growth in mobile revenues. Belgium.Annex 1 . Western European mobile operator revenue Western Europe cellular market has reached a level of maturity that is intensifying the level of competition amongst mobile operators. T-Mobile. quality of services. domestic regulations (Bersani Decree in Italy). Greece and Italy have registered penetration rates above 150% in early 2008. Operators are now focusing on revenue stimulation and fighting churn through key competitive factors such as: price elasticity. Keeping the right balance between CAPEX and profitability is sure to be a key challenge for service providers that operate in the region.

it also means that market leaders are turning their strategies to increasing revenue share instead of customer share. Although both operators reported an increase in their installed base. or 3. Telefonica O2 and T-Mobile’s operations in Western Europe altogether reached 106.7% revenue growth) and Vodafone Germany (7. representing nearly 70% of the total revenues in the region. This shows that the second half of the year is the period when operators generate the highest revenues. By default.3% respectively between 2006 and 2007. what has changed is that operators are now primarily focusing on customer retention instead of customer acquisition. Figures 2 and 3 show the top 10 fastest and slowest growing operators in terms of total revenue growth in 2007 along with their average quarterly connections growth. TIM. In terms of the dominance of major operator groups in the region.5% in Q4. in contrast. The decline is also justified by the MVNO Page 102 of 110 . 25. Vodafone. Orange. weakened ARPU and the implementation of cuts in termination rates. Germany and Italy are showing signs of a high level of maturity that may lead to a plateau of development throughout 2009.7% in Q3 and 25. O2 Germany. those two quarters have always ruled the market dynamics. This is partly due to pressure on voice pricing.8% in Q2.Source: Wireless Intelligence. For instance. T-Mobile Deutschland (2.6 billion Euros last year. In Italy. 2008 The seasonality in revenue figures has remained unchanged since 2006: 24% in Q1. The remaining 30% is left to local operators and smaller groups such as Telenor. they were unable to offset the consequences of price pressure.1%) have reported negative growth in their total revenues from 2006 to 2007 although their connections base grew by an average of 2% last year. 24. Both operators have reported a decline in total revenues of 5% and 2. Whilst there is nothing new in this. KPN. has reported a higher revenue growth (15. It is interesting to note that a few markets have rapidly changed over the last two to three years mainly due to high penetration rates and new regulatory initiatives. Q3 holds the summer holiday season and is the battleground of prepay campaigns whilst Q4 is characterized by strong activity during the winter/Christmas holiday season.9%) over the same period. the same rules apply for Vodafone and TIM.

implementation of the Bersani Decree which requires operators to eliminate top-up charges from all the rate plans and all top-up channels. As the Italian market is home to 90% prepaid users, the Bersani Decree had a substantial impact on revenues generated by operators since its implementation in March 2007. Figure 2: Top 10 fastest growing operators: Revenue growth vs. average quarterly connections growth, 2007

Source: Wireless Intelligence, 2008 Figure 3: Top 10 slowest growing operators: Revenue growth vs. average quarterly connections growth, 2007

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Source: Wireless Intelligence, 2008 Data usage drives revenue growth Recurring revenues have been estimated at 90% of the total revenues in Q4 last year. Voice revenues represent 78% of the recurring revenues and non-voice revenues hold the remaining 22%. Non-voice revenues show substantial growth of 18% from Q4 2006 to Q4 2007, demonstrating the take off of data usage. Voice revenues are under clear pressure in most markets as efforts from operators to stimulate voice usage have led to a decline in effective price per minute. Despite the competitive environment in Italy, Vodafone and TIM have registered strong growth in nonvoice revenues, with 25.8% and 22.2% growth respectively between Q4 2006 and Q4 2007. In Austria, Mobilkom reported that non-voice revenues represented 30% of its total recurring revenues in Q4 2007 compared to 24.1% in Q4 2006. T-Mobile Austria non-voice revenues represent 22.6% of its recurring revenues in Q4 last year against 15% in Q4 2006. In Portugal, the situation is similar with Optimus and TMN reporting high growth in non-voice revenues over the same period with 25% and 40% growth respectively (20% of their recurring revenues in Q4 2007). Italy, Austria and Portugal all have high penetration rates (over 120%) and have seen a fast adoption of high-speed services. WCDMA Family (WCDMA + WCDMA HSPA) connections already represent just over 15% of the total connections of Mobilkom Austria, T-Mobile Austria, TMN, and TIM. Optimus is already set at more than 30% and Vodafone Italy at 24%. The adoption of mobile broadband along with good network coverage have been key to fast adoption of data usage to drive an increase in non-voice revenues. It is interesting to note that data usage growth is mainly driven by the sales of USB-dongles, and more recently HSPA-enabled laptops. Along with the widespread of unlimited data plans (an average of 20 Euros per month in Western Europe), such offers tend to dilute ARPU but generate incremental cellular connections and incremental revenues for operators. Currently, mobile broadband services are only available to contract users but introducing such services to the prepay market (around 60% of the total connections in the region) will generate higher gains for operators and speed up the adoption of high-speed services.

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Mobile Revenues as a share of GDP According to the OECD (Organisation for Economic Co-operation and Development), the average yearly growth in GDP in 2007 was set at 2.6% in Western European markets (EU15 countries). Over the same period, mobile revenues accounted for 1.5% of GDP. Figure 4 shows mobile revenues as a share of GDP for the EU15 countries, and compares it to revenue growth and GDP growth in 2007. It shows how disparate Western European countries are and the difficulty in correlating cellular revenues growth and GDP growth. However, we came to the conclusion that in most countries, mobile revenues are growing faster than GDP. We can identify some groups of countries that seem to follow similar patterns and profiles: Greece, Finland, Ireland, Spain and Netherlands: all 5 markets have reported a growth in mobile revenues faster than GDP growth. In those markets, the average penetration is around 120% (a part from Greece already at 165%) and GDP growth in 2007 is around 4%. United Kingdom and Sweden: both markets have reported mobile revenues growth faster than GDP. The average penetration is around 120%, GDP growth in 2007 is around 3%. Portugal and Denmark: both markets have reported mobile revenues growth (around 6-7%) faster than GDP growth. The average penetration is around 120%, GDP growth in 2007 is around 3%. Germany, Belgium, Switzerland and Austria: average penetration is around 110%, GDP growth in 2007 is around 3%, but all four markets have reported a decline in mobile revenues in 2007. France and Italy: two exceptions. France is showing a market penetration below the 100% mark (82%) and GDP growth below the 3% average in 2007. Although it is reporting a 3.1% growth in mobile revenues last year, the market is lagging behind in terms of high-speed network coverage. Italy is highly penetrated (153%) and is reporting the slowest GDP growth amongst those countries (1.4%) in 2007. Its decline in mobile revenues is mainly due to implementation of new European and domestic regulations as well as price pressure amongst operators. Figure 4: Mobile Revenues as share of GDP, 2007

Source: OECD, Wireless Intelligence, 2008. GDP figures have been extracted from the OECD online database on the 02/09/2008.

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10. MVNO Page 106 of 110 .

MVNO Page 107 of 110 . There is price flexibility also in the mobile communication sector 2.MVNO Experience The highly competitive Nordic • • • • • The customers are harder to get then planned The internal procedures and the amount of work needed is underestimated Everything takes time and even though it is a ”light” solution many interactions has to be solved = You have to work in parallell Keep as much as possible simple and standard Telogic track record is 28 days – from start to commercial launch Conclusions 1.Annex 2 . Brand diversity is new in the mobile communication sector–but a recipe for success in many other lines of business.

Customers are not prepared to pay for everything that is technically feasible MVNO Page 108 of 110 .3.

data. messaging. MVNO Page 109 of 110 . Commonly includes revenue from equipment.Annex 3 .Glossary 3G 3rd generation mobile system 3GPP 3rd generation partnership program developing global specifications BSC Base Station Controller BTS Base Transceiver Station Core Network The systems that control traffic flowing to and from the RAN CRM Customer Relationship Management CS Circuit Switching GPRS General Packet Radio Service GSM Global System for Mobile Communications HLR Home Location Register ICT Information/Communication Technology IMS IP Multimedia Subsystem IMSI International Mobile Subscriber Identity IN Intelligent Network IP Internet Protocol ISN Intelligent Service Node IT Information Technology MGW Media Gateway MMSC Multimedia Messaging Service Center MNC Mobile Network Code MNO Mobile Network Operator (host) MSC Mobile services Switching Center MSS Mobile Switching Solution MVNE Mobile Virtual Network Enabler MVNO Mobile Virtual Network Operator NGN Next Generation Network OSS Operation and maintenance subsystem OTA Over-the-air technology PLMN Public Land Mobile Network Service Delivery Platform A platform used to deliver non-voice services to a mobile customer SGSN Serving GPRS Support Node SIM Subscriber Identity Module SMSC Short Message Service Center SS7 Signaling System no 7 UMA Unlicensed Mobile Access UMTS Universal Mobile Telecommunications Services VMSC Visited Mobile services Switching Center VAS Value Added Services VoIP Voice over IP VPN Virtual Private Network WAP Wireless Access Protocol Total revenue: Total operator reported revenue. Non-recurring revenue: All revenue reported that is excluded from recurring revenue. including all recurring and non-recurring revenues. Voice revenue: Recurring network revenue attributable to voice services. interconnection and roaming but excluding revenue from handset sales and connection fees. Recurring revenue: Revenue generated by subscriber use of the network including voice. and any other revenue not generated directly by network subscribers.

Greece. downloads. MVNO Page 110 of 110 . Finland. Sweden. Switzerland and United Kingdom. Italy. Belgium. EU15 countries: Austria. GDP data has been sourced from the OECD online database on 02/09/2008. Germany. Netherlands. Spain. Denmark. France. Ireland. at constant prices. GDP: Gross Domestic Product.Non-voice revenue: Recurring network revenue attributable to non-voice services including messaging. Portugal. Internet browsing and other data services.

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